Revisiting the Validity of Phillips Curve in Nigeria: An ARDL Approach

Abstract

It is evident that in Nigeria inflation and unemployment are growing simultaneously and pose a serious question in terms of the validity of the Phillips curve in Nigeria. This study investigates the relationships that exist with respect to inflation and unemployment in Nigeria using data from the CBN statistical bulletin (2020) from 1981 to 2020. The ARDL model (autoregressive distributed lag) was employed in the study. The study revealed an inverse and significant link between inflation and unemployment only in the short run, while a positive, as well as significant relationship, was found that connects inflation and output in Nigeria also in the short run. We, therefore, recommend the need for government to always consider unemployment in formulating policies aimed at achieving price stability. We also recommend that the government adopts labour-intensive techniques of production to reduce costs and, by extension, reduce the prices of goods and services.