| Summary: | This study aims to analyze the relationship between inflation and unemployment in
10 countries which classified in two categories: Upper Middle Income and Lower
Middle Income for periods 1990-2011. The question regarding the new theories of
Phillips Curve is, �Is the traditional Phillips Curve still reliable in developing
countries?�. To answer this question, we use panel data method with quadratic
variable to estimate the model in two income classification and do some treatment
tests for data. Overall, we found support that Lower Middle Income countries still
have negative relationship between inflation and unemployment, so that Phillips
Curve is still reliable in Lower Middle Income countries. Meanwhile, Upper Middle
Income countries now have the positive relation between inflation and unemployment.
We also found that real interest rates and money supplies are significant factors
which can affect inflation rates in the country.
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