Understanding the Relationship between Unemployment and Inflation in Nigeria

Abstract

This study investigated the relationship between unemployment and inflation in Nigeria from 1980-2015. The model specified unemployment as a function of inflation, money supply % GDP, total government expenditure % of GDP. The statistical tests used were causality test, VECM test, co integration test. Based on the above tests carried out, the study found out that: (i) Inflation significantly impacted unemployment in Nigeria both in the long run and short run within the period under review.(ii) There exist a significant causal relationship among the variables in the model. Based on the results, the study recommended that government should use discretionary policy that would reduce unemployment by boosting government expenditure and maintain stability in money supply.

Keywords: Unemployment, Inflation, Philip’s curve, Nigeria, Co integration, Granger causality.