Phillips curve structural breaks in contemporary Bosnia-Herzegovina: Evidence of regime transformation

The study provides the first comprehensive evidence of Phillips curve structural breaks in a post-war Bosnia and Herzegovina, documenting a fundamental economic transformation that challenges conventional understanding of unemployment-inflation dynamics in transition economies. The Phillips curve in BiH is state-dependent, meaning that it varies with economic conditions rather than representing the permanent structural features. Our findings show that during the relatively stable period of 2018-2021, BiH showed a weak negative unemployment-inflation relationship. However, following the 2022-Q1 structural break, the relationship reverted to a positive pattern. Our work suggests that the crisis periods trigger the anomalous relationships while the stable periods restore traditional dynamics.