The Death of the Phillips Curve

1. Objective This paper investigates the structural breakdown of the classical Phillips Curve trade-off between labor market slack (unemployment) and price inflation in small, open, resource-dependent transition economies, using Kazakhstan (2010–2026) as a baseline case study. 2. Methodology & Execution Time-Series Framework: Operationalized high-frequency quarterly macroeconomic data, applying Augmented Dickey-Fuller (ADF) unit-root tests to establish stationarity across price, labor, and monetary variables. Robust Regressions: Built three progressively expanding macroeconometric models using Newey-West (HAC) robust standard errors to evaluate labor slack versus external cost-push shocks. SVAR Modeling: Implemented a Structural Vector Autoregression (SVAR) system with a lower-triangular Cholesky identification matrix to map Impulse Response Functions (IRF) across an 8-quarter forecast horizon. 3. Key Findings & Impact Labor Slack Neutrality: Replaced classical Keynesian assumptions by showing that official unemployment metrics exhibit no statistically significant relationship with core consumer inflation ($\beta = 1.3003, p = 0.3011$). Exchange Rate Dominance: Proved that nominal currency devaluation shocks ($\text{USD/KZT}$) exercise an immediate, statistically dominant pass-through impact ($\beta = 14.4483, p < 0.0001$), boosting model explanatory power ($R^2_{\text{adj}}$) from $0.0027$ to $0.5482$. Policy Directive: Confirms that inflation targeting in resource-dependent economies must prioritize exchange rate stabilization and import-dependence reduction over traditional labor market fine-tuning.