Tradeoff between Inflation and Unemployment: Implications on the Growth of the Nigerian Economy

This research investigated the tradeoff between inflation and unemployment and its implications on the growth of the Nigerian economy for the period 1981 – 2024. Data used in formulating the specific objectives include inflation rate, unemployment rate, misery index and real gross domestic product. The misery index captured the trade-off between inflation and unemployment as it equates both variables. The data were sourced from the central bank of Nigeria (CBN) statistical bulletin and analyzed using the auto-regressive distributed lag (ARDL) model. The findings revealed that inflation rate negatively affected economic growth but not significantly; unemployment rate negatively affected economic growth of Nigeria significantly for the period reviewed while the tradeoff between inflation and unemployment (misery index) had positive but not significant effect on growth of the Nigerian economy. The study concluded that the initial proposition of the Philips curve was applicable to Nigeria as there was inverse relationship between inflation, unemployment rate and economic growth in the long run. This means that increase in unemployment stunts Nigeria’s economic growth in the long run and at the same time, inflation rate decreased economic growth. However, the balance or trade-off which inflation and unemployment creates exerted positive effect on growth in real GDP. The recommendation was that sound monetary policy, increased production and employment will decrease unemployment rate, tame inflation rate and increase output.