THE RELATIONSHIP BETWEEN UNEMPLOYMENT AND INFLATION NIGERIA TESTING PHILIPS CURVE

ABSTRACT This study evaluated the relationship between Unemployment and Inflation rates in Nigeria, using the Philips curve. The specific objectives of this study was to ascertain the relationship between unemployment rate and inflation in Nigeria, to investigate the short run relationship between unemployment rate and inflation in Nigeria and to analyse the long run relationship between unemployment rate and inflation in Nigeria. The time series data ranging from 1990 to 2024 was used for this study. The ARDL model was used to analyze the data. Findings revealed that unemployment rate has a positive and insignificant relationship with Inflation in Nigeria. Unemployment rate has a short run relationship with Inflation in Nigeria. Lastly, Unemployment rate has a long run relationship with Inflation in Nigeria. Based on the findings emanating from the regression analysis of this study, the study concludes that, fluctuations in unemployment possibly due to seasonal factors, policy shifts, or short-term economic shocks can influence inflationary trends within a limited time frame. Policymakers should be mindful of this dynamic, as short-term interventions in the labor market could have immediate, effects on inflation levels. It is recommended that policy measures should be carefully balanced to avoid fueling inflation while promoting job creation. Reforms such as improving education and vocational training, supporting entrepreneurship, and removing barriers to business growth should be implemented in order to reduce unemployment sustainably. Lastly, the government should develop responsive policies that can quickly address temporary shocks to the labor market, such as through targeted job programs, unemployment benefits, or wage subsidies.