Olufemi Gbenga Onatunji, Oluwayemisi Kadijat Adeleke and Akintoye Victor Adejumo
This study reinvestigates the validity of the Phillips curve in Nigeria for the period 1980–2020 by considering the asymmetric nexus between unemployment and inflation.
Abstract
Purpose
This study reinvestigates the validity of the Phillips curve in Nigeria for the period 1980–2020 by considering the asymmetric nexus between unemployment and inflation.
Design/methodology/approach
The nonlinear autoregressive distributed lag (NARDL) technique was used to decompose the unemployment variable into two components: tight and loosened labour markets.
Findings
The empirical outcome shows that unemployment has a significant negative effect on inflation when the labour market is tight and a weakly negative and significant effect on inflation when the labour market is loose. The study confirms an asymmetric Phillips curve in Nigeria since the positive (tight) unemployment rate exerts a greater effect on inflation than the negative (loosened) unemployment rate.
Practical implications
The findings of this study have important implications for implementing monetary policy in Nigeria.
Originality/value
To the best of the authors’ knowledge, this is the first study to investigate the existence of a nonlinear Phillip curve in Nigeria.