Non-linearity in the Phillips curve: evidence from Nigeria

PurposeThis 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/approachThe nonlinear autoregressive distributed lag (NARDL) technique was used to decompose the unemploym...

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Bibliographic Details
Published in:African journal of economic and management studies 2024-02, Vol.15 (1), p.132-144
Main Authors: Onatunji, Olufemi Gbenga, Adeleke, Oluwayemisi Kadijat, Adejumo, Akintoye Victor
Format: Article
Language:English
Subjects:
Asymmetry
Deflation
Economic conditions
Economic growth
Inflation
Labor market
Literature reviews
Monetary policy
Phillips curve
Prices
Unemployment
Wages & salaries
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Summary:PurposeThis 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/approachThe nonlinear autoregressive distributed lag (NARDL) technique was used to decompose the unemployment variable into two components: tight and loosened labour markets.FindingsThe 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 implicationsThe findings of this study have important implications for implementing monetary policy in Nigeria.Originality/valueTo the best of the authors’ knowledge, this is the first study to investigate the existence of a nonlinear Phillip curve in Nigeria.
ISSN:2040-0705
2040-0713
DOI:10.1108/AJEMS-10-2022-0418