INFLATION AND UNEMPLOYMENT RELATIONSHIP: A DYNAMIC REPORT OF NIGERIA AND MEXICO IN THE PERSPECTIVE OF PHILLIPS CURVE FROM 1991-2016

Abstract

This research study investigated the relationship between unemployment and inflation in Nigeria and Mexico from 1991-2016. Secondary data were used to gather data from the World Bank database, Central Bank of Nigeria and Bank of Mexico. In order to determine the set objective, OLS and simple regression analysis of the econometric model were used. The models specified inflation as function unemployment, money supply % GDP, total Gross Formation Products. Based on the above test carried out, the study finds out that: Inflation significantly has little impact on unemployment in Nigeria both in the long – run and short – run within the period under review. In Mexico, there is actually no significant relationship between unemployment and inflation because when inflation is high, unemployment in Mexico is also high. The study shows that investors have an inverse relationship with unemployment in Mexico. There is also an inverse relationship between inflation and GDP in Mexico and Nigeria. And in regard to the findings above the study recommends that the government should use discretionary policy that would reduce unemployment by boosting the level of investment and maintaining stability in the money sup-ply as it had a positive impact on Inflation in the long run. Friedman is of the view that the increase in government spending and the rate at which economy borrows, the higher the inflation.