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The Relationship between Inflation and Unemployment in Ghana: Analysis of the Philips Curve

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  • Elliot, Boateng

Abstract

The aim of this study is to explore the relationship between inflation and unemployment in Ghana. The study also aims to test for the existent of the Philips curve in Ghana using the new Keynesian Philips curve model on annual time series data sampled from 1970 to 2013. The sample period was divided into two subsamples -from 1970 to 1982 and 1983 to 2013- in order to test for the effect of the Economic Recovery Programme on the relationship between inflation and unemployment. The empirical estimate reveals that, changes in unemployment does not brings about changes in inflation both subsample periods. Again, the study rejects evidence of the Philips curve in Ghana. This is attributed to the fast growing labour force that lack the appropriate skills to earn them a job placement, alarming rate of rural-urban migration, imperfect market information which has resulted in mismatch of that makes inflation unresponsive to changes in unemployment. Monetary policies to influence inflation would not bring about any trade-off between inflation and unemployment. To reduce the ever increasing unemployment in Ghana, policy direction should focus on creating job opportunities for both uneducated and educated individuals.

Suggested Citation

  • Elliot, Boateng, 2015. "The Relationship between Inflation and Unemployment in Ghana: Analysis of the Philips Curve," African Journal of Economic Review, African Journal of Economic Review, vol. 3(2), July.
    • Handle: RePEc:ags:afjecr:264381
    DOI: 10.22004/ag.econ.264381
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    References listed on IDEAS

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    Cited by:

    1. Fredrick Nsambu Kijjambu & Benjamin Musiita & Asaph Kaburura Katarangi, 2024. "Human Capital Development and Unemployment in Uganda: The Keynesian Theory of Unemployment in Perspective," Journal of Economics and Behavioral Studies, AMH International, vol. 16(1), pages 94-108.
    2. Ademola Obafemi Young, 2021. "Cohort Size and Unemployment Rate: New Insights from Nigeria," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 13(1), pages 122-151, January.
    3. Abiodun O. Folawewo & Oluwafemi M. Adeboje, 2017. "Macroeconomic Determinants of Unemployment: Empirical Evidence from Economic Community of West African States," African Development Review, African Development Bank, vol. 29(2), pages 197-210, June.

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