NEXUS BETWEEN UNEMPLOYMENT, INFLATION AND ECONOMIC GROWTH IN NIGERIA

Abstract

Unemployment and inflation are twin evils that are bedeviling economies of the world and have continuously attracted the concern of economists. Most developing countries Nigeria in particular is battling with these problems. This study examines the nexus between unemployment, inflation and economic growth in Nigeria from 1981 to 2020. Diagnostic test was conducted to ascertain the behavior of the series. The Augmented Dickey Fuller (ADF) and Philips Perron (PP) test results are reported. Based on the test, the variables in the model are of mixed order of integration i.e., two of the variables are I(1) and one is I(0) . The Autoregressive distributed lag (ARDL) bound co-integration test was conducted to check for possible long run relationship. It was found that there is a long-run relationship in the model. Thus, the ARDL ECM was used for the estimation. Results from the ARDL estimation reveal that the Error Correction Mechanism (ECM) has the expected negative sign with a high speed of adjustment of 71% back to equilibrium; there is a long-run negative relationship between unemployment and economic growth in Nigeria over the period of study; there is a long-run negative relationship between inflation and economic growth in Nigeria over the period of study. Based on these findings, this paper recommended that the government of Nigeria should spend more money on training and skill acquisition in order to combat unemployment. More so, excessive and galloping rise on the prices of goods and services in Nigeria should be control.