Abdulganiyu Salami, Joseph Paul, Tijjani Mamman

Keywords: Inflation rate, unemployment rate, nonlinear unit root, nonlinear ARDL

Abstract

Economic growth depends on the magnitude and signs of macroeconomic variables like interest rate, inflation and unemployment rates. While many studies have investigated the linear relationship between economic growth and its determinants, only few have assessed non-linear relationship between economic growth and its determinants. It is in view that this study investigated the non-linear responses of Nigerian economic growth to positive and negative changes in inflation and unemployment rates. The study adopted non-linear unit root test and non-linear ARDL as the estimation methods. The non-linear bound test shows that inflation and unemployment are cointegrated with economic growth in the long-run. The study also found that increase in inflation rates leads to increase in economic growth at statistical significance of 5%, and that decrease in inflation rate also leads to increase in economic growth. The study concludes that both the positive and negative changes in unemployment rates are positively associated with Nigerian economic growth at 5% statistical significance. The study recommends that policymakers are to tighten and consolidate the inflation-targeting programmes of the Central Bank of Nigeria and employment generation programmes of the government to achieve inflationary and unemployment rates that are harmless to the economy.

Author Biography

Abdulganiyu Salami

Joseph Paul

Tijjani Mamman

Department of Economics, Federal University of Lafia

Email: [email protected], [email protected], [email protected]

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