Non-linearity in the Phillips curve: evidence from Nigeria

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.

Citation

Onatunji, O.G., Adeleke, O.K. and Adejumo, A.V. (2024), "Non-linearity in the Phillips curve: evidence from Nigeria", African Journal of Economic and Management Studies, Vol. 15 No. 1, pp. 132-144. https://doi.org/10.1108/AJEMS-10-2022-0418