Abstract
This study considered the impact of inflation on unemployment in Nigeria viz avis selected macroeconomic variables. The researcher adopted co integration, vector error correction model and VEC Granger causality test econometric procedure in the analysis of the data employed. The specific objectives of the study are; (i) to determine the extent to which inflation impact on unemployment in Nigeria within the period of study, (ii) to examine if government expenditure have any significant impact on unemployment in Nigeria within the period of study, (iii) to estimate the significant impact of foreign direct investment on unemployment in Nigeria within the period of study; (iv) to investigate the extent of direction of causality between unemployment and inflation in Nigeria within the period of study. The results of the research revealed long run relationship among estimated variables, VECM result showed a positive significant relationship between inflation and unemployment in the short run and long run, government expenditure and foreign direct investment maintained negative relationship with unemployment both in the short and long run. The VEC Granger causality test indicated causality among UNEM, INF and TGEX. The research recommended that (i) government should focus on policy and strategy that can attract foreign direct investment into the country, (ii) government should try to maintain low inflation rate through suitable monetary policy; (iii) government should encourage investment platforms and enabling environment for effective and efficient national output; and (iv) Government should consciously increase fiscal space for capital activities and projects that are capable of generating income, increase domestic and public spending, improve economic status and reduce unemployment. This paper concluded that the Philip’s curve hypothesis does not apply in Nigeria within the period of study as the result failed to establish an inverse relationship as postulated by A.W. Philips.
Highlights
Inflation is the consistent increase in the price of goods and services in an economy
Implying that a falling unemployment rate generally occurs alongside rising gross domestic product (GDP), higher wages, and higher industrial production
Nigeria remains a leading oil importing country, despite being a major producer of oil, denying our youths the opportunities inherent in the sector and with all its associated effects on exchange rates, inflation. This is explained by economic theory that claims that with economic growth, inflation exist which in turn should lead to more jobs and less unemployment
Summary
Inflation is the consistent increase in the price of goods and services in an economy. While Unemployment on the other hand is the number of economically active population without work but are willing and seeking for work These include those who have lost their jobs. The problem of inflation in Nigeria was brought about by the oil glut in 1981, which resulted into balance of payment deficits leading to foreign exchange crisis that necessitated various measures of import restrictions These restrictions reduced raw materials for domestic production and spare parts for machinery operation. Nigeria remains a leading oil importing country, despite being a major producer of oil, denying our youths the opportunities inherent in the sector and with all its associated effects on exchange rates, inflation This is explained by economic theory that claims that with economic growth, inflation exist which in turn should lead to more jobs and less unemployment. This study statistically investigated relationship between inflation and unemployment in Nigeria within the study period
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