Abstract:
This study examines the relationship between inflation and unemployment within the context of Nigerian economy from 1961-2015. The study focuses on examining the existence and applicability of Philips curve theory or otherwise in Nigeria during the period understudy. The study applied augmented Dickey-Fuller and Philip Perron technique to examine the unit root property of the data. ARDL-bound testing approach was conducted to examine both long- and short-run relationship between inflation and unemployment in Nigeria. The result from bound testing reveals that there exist a long-run relationship between inflation and unemployment in Nigeria. The estimated long run model reveals that there exist a positive and insignificant relationship between inflation and unemployment in Nigeria. That is to say that inflation has no significant impact on unemployment in Nigeria. This is contrary to the Philips curve theory, which postulates the trade-off between inflation and unemployment. Therefore, based on the empirical result, Philips curve theory or hypothesis does not hold or exists in the Nigerian economy. We therefore recommend the policy makers in Nigeria to embark on stabilization policies which aimed at checking or minimizing the rates of inflation and unemployment concurrently |
