PROJECT(UNEMPLOYMENT AND INFLATION IN NIGERIA,ANY TRADE-OFF

Abstract

The existence of trade-off between unemployment and inflation in Nigeria has remained a controversial issue. While some scholars argue in favour of its existence others claimed Philips curve is nothing but an illusion. This study therefore contributes to the existing literature by trying to find out if there is trade-off between unemployment and inflation in Nigeria using a time series data from 1991-2014.the ordinary least squares (OLS) technique and granger causality test were used to examine the dynamics of the relationship between unemployment rate and inflation rate in Nigeria. The analysis revealed an inverse relationship between unemployment and inflation thereby validating the relevance of Philips curve in Nigeria. The study recommended that the government should formulate efficient and effective policies which would absorb the unemployed into the informal sectors and contractionary monetary policy should be adopted by the use of federal bank reserves.

Keywords: inflation rate, unemployment rate, Philips curve, Trade-off, OLS, granger Causality.