The Role of Inflation Rate on Economic Growth and Unemployment In Nigeria

Abstract

Over the years, several studies have been carried out to establish the relationship between economic growth and unemployment but limited attention was given to the role of inflation on the relationship between economic growth and unemployment. Therefore, this study investigates the role of inflation on economic and unemployment in Nigeria over the period 1981 to 2018 through the application of Auto-regression Distributed Lag (ARDL) model. The ARDL Bounds test to co-integration revealed that unemployment, economic growth, inflation rate and interaction term do not have long run relationship. Furthermore, the result of the short run ARDL estimate revealed that economic growth has significant positive relationship with unemployment when economic growth interacts with inflation rate over the period under study and the relationship is significant only at maximum and mean level of inflation rate. Based on the result, the study recommends that government should formulate policies to control the level of inflation rate to a minimal level.