ABSTRACT

This study is an analysis of the Phillips hypothesis and Nigeria’s economic growth. The  following were the specific objectives; to ascertain whether Phillips assertion of negative relationship between unemployment and inflation holds in Nigeria; to estimate the extent to which unemployment affect economic growth in Nigeria and to determine whether there is any significant impact of inflation on economic growth in Nigeria. The study which covered the period between 1981 and 2018 employed various techniques of econometric analysis using the ex-post facto research design. The study began with a test of stationarity which was conducted using Augmented Dickey Fuller method and the findings showed that three of the variables employed were stationary at level while others were stationary at first difference. The study had two separate equations with the first equation aimed at ascertaining the validity of Phillips hypothesis in Nigeria while the second addressed the issue of how unemployment and inflation variously affect economic growth in Nigeria. The study employed the Autoregressive distributed lag/Bounds testing procedure developed by Perseran and Shin (2001) and the result showed evidence of long run equilibrium relationship between the variables employed in the two models. Specifically, the first model showed that inflation has a negative relationship with unemployment, signaling a tradeoff relationwhile the second model showed that there is a negative relationship between inflation and economic growth and a positive relationship between unemployment and economic growth in Nigeria in Nigeria. Based on the above findings, the study recommended, among others, that in putting up policies to ameliorate unemployment, caution should be applied by policy makers to ensure that such policies do not trigger very high rate of inflation.