Stagflation in Hungary?

Eurozone and EU-wide unemployment have stayed at their record December highs of 9.9 and 9.5 per cent, respectively.

Looking at the by-country data is instructive. With inflation data released at the end of last week, we thought a Phillips curve might be in order:

Economic theory posits a trade-off between unemployment and inflation. As inflation falls, unemployment rises (unless an economy has entered a dreaded period of stagflation, in which inflation and unemployment rise together).

Hungary is a clear outlier, with inflation and/or unemployment higher than the average trade off for other countries. (Please note: the grey curved line above was done by hand – more art than science.)

Hungary’s inflation and unemployment has been rising for the past few months, consistently and simultaneously. This is true of many countries at present and is not conclusive in itself.

* Please note: all inflation data is Jan10/Dec09. Unemployment data is mostly January, but uses the latest available data where January is unavailable. See unemployment source data for clarification.