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Non-linearity in the Phillips curve: evidence from Nigeria

Author

Listed:
  • Olufemi Gbenga Onatunji
  • Oluwayemisi Kadijat Adeleke
  • Akintoye Victor Adejumo

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.

Suggested Citation

  • Olufemi Gbenga Onatunji & Oluwayemisi Kadijat Adeleke & Akintoye Victor Adejumo, 2023. "Non-linearity in the Phillips curve: evidence from Nigeria," African Journal of Economic and Management Studies, Emerald Group Publishing Limited, vol. 15(1), pages 132-144, September.
    • Handle: RePEc:eme:ajemsp:ajems-10-2022-0418
    DOI: 10.1108/AJEMS-10-2022-0418
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    More about this item

    Keywords

    Phillip curve; Unemployment; Inflation; NARDL cointegration; Nigeria; C20; C32; C51; E30; E31;
    All these keywords.

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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