Does Philips Relations Really Exist in Nigeria? Empirical Evidence

Ojapinwa, Taiwo V.; Esan, Folorunso

doi:10.5539/ijef.v5n9p123

Cited by 8 publications

(11 citation statements)

References 39 publications

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“…Moreover, a positive relationship might also emerge between inflation and the unemployment rate in the long-run. Ojapinwa and Esan (2013) and Simionescu (2014) further observe a weak positive relationship between inflation and unemployment in Nigeria and Romania, respectively. These findings clearly show that the Phillips trade-off might not always behave as in theory.…”

Section: Literature Reviewmentioning

confidence: 94%

“…Despite some early criticisms of the basic tenets of the Phillips Curve (Samuelson and Solow, 1960;Phelps, 1967;Friedman, 1968;Lucas, 1976), the hypothesis remains one of the most important foundations for macroeconomics. However, after 2008 Great Recession, many studies have challenged the validity of the Phillips curve (Ball and Mazumder, 2011;Russel and Banerjee, 2008;Paul, 2009;Bernanke, 2010;Karan Singh et al, 2011;Hall, 2011;Daly et al, 2012;Ojapinwa and Esan, 2013;Nub, 2013;Wimanda et al, 2013;Simionescu, 2014;Coibion and Gorodnichenko, 2015;Friedrich, 2016;IMF, 2013;Doser et al, 2017, Sovbetov andKaplan, 2019), when the unemployment rate rapidly scaled up, but inflation did not decline as much as the curve predicted it would 2 . They also underline the variability of the Phillips relationship across countries.…”

Section: Introductionmentioning

confidence: 99%

“…They also underline the variability of the Phillips relationship across countries. Russel and Banerjee (2008), Paul (2009), Fendel et al (2011), Ojapinwa and Esan (2013), Nub (2013), Simionescu (2014), Coibion and Gorodnichenko (2015), and Murphy (2018) investigate nonlinearities in the Phillips Curve caused by external factors. This is quite important as any significant changes in behaviour of inflation and unemployment during recessionary periods might also be one of the reasons for the failure of the relationship.…”

Section: Introductionmentioning

confidence: 99%

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Causes of failure of the Phillips curve: Does tranquillity of economic environment matter?

Sovbetov¹,

Kaplan²

2019

EurJ Appl Econ

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Although empirical literature regarding the Phillips curve is sizeable enough, there is still no wide consensus on its validity and stability. The literature shows that the Phillips relationship is fragile and varies across countries and time periods; a statistical relationship that appears strong during one decade (country) may be weak the next (other). This variability might have some grounds for idiosyncrasy of a country and its economic environment. To address it, this paper scrutinizes the Phillips relationship over 41 countries over the period 1980-2016, paying attention to how inflation dynamics behave during tranquil and recessionary periods. As a result, the paper confirms the variability of the Phillips relationship across countries, as well as time periods. It documents that the relationship holds in the majority of developed countries, while it fails to hold in emerging and frontier economies during tranquil periods. On the other hand, the relationship totally collapses during recessionary periods, even in developed markets. This shows that tranquillity of economic environment is significantly important for the Phillip trade-off to work smoothly. Moreover, both backward-and forward-looking fractions of inflation remarkably increase during recessionary periods as a result of the Phillips coefficient loses its significance within the model. This indicates that markets become more inflation-sensitive during these periods.

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Section: Literature Reviewmentioning

confidence: 94%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Causes of failure of the Phillips curve: Does tranquillity of economic environment matter?

Sovbetov¹,

Kaplan²

2019

EurJ Appl Econ

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“…The results indicate the presence of high inflation and unemployment rates (stagflation) in Nigeria, thus refuting the proposition of the short-run Phillips curve. In a similar study, Ojapinwa and Esan (2013) the outcome of their findings show that the inflation rate and unemployment rate are negatively related in the short-run. In the long-run, the inflation rate and unemployment rate are positively related, thereby indicating stagflation in the Nigerian economy.…”

Section: Empirical Review On Inflation and Unemploymentmentioning

confidence: 84%

Issues of Unemployment in Nigeria: Effect of Real Exchange Rate and Inflation Interaction

Olanrewaju

2019

Quarterly Journal of Econometrics Research

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Article History KeywordsInflation Real exchange rate Unemployment Generalized moment method Marginal effect Interaction of real exchange rate and inflation.Contribution/Originality: This study contributes to the existing studies by distinguishing itself identifying the simultaneous impact of these two fluctuating variables (inflation rate and real exchange rate ) on unemployment, unlike existing literatures which addressed these impacts on unemployment separately and assessing how inflation influences the impact of real exchange rate on unemployment in Nigeria. The study adopts descriptive analysis and generalized method of moment. 1969). Another argument is that trade-off between inflation and unemployment exist in long run because of money supply and productivity growth leads to decrease in unemployment, while supply shock like oil prices leads to increase in unemployment and that increase in productivity growth causes decrease in inflation and also fall in unemployment (Tang and Lean, 2009; Karanassou and Sala, 2010).The relationship between exchange rate and unemployment is controversial, if positive or negative relationship exists between the two variables. Literature establishes that changes in real exchange rates have tendency of impacting the reallocation of resources between sectors of the economy as they reflect changes in relative prices of domestic and foreign goods which influence employment in an economy. Trade theory suggest that a depreciation of real exchange rate increases the competitiveness of the country's exports and hence the demand for labour increases. On the other hand, a depreciation of real exchange rate increases the cost of intermediate inputs which might offset the first effect such affect production level adversely which tends to reduce competitiveness of the country export and hence, demand for labour decreases (Demir, 2010;Feldmann, 2011).In Nigeria, statistics revealed that between 2013 and 2014, the unemployment rate increased from 16.7 to 17.1, despite an increase in annual real GDP from 5.4% to 6.3% with a decrease in the annual inflation from 8.5% to 8% whereby an improvement of real effective exchange rate occurred from 74.20 and 69. 51. Subsequently, unemployment further reveled 17.6 %, 18 % and 18.5% in 2015, 2016 and 2017 respectively. The corresponding real GDP were 2.7%, -1.6% and 0.8% in 2015, 2016 and 2017 respectively. The purchasing power of households further declined as a result of a continuous increase in the annual inflation with 9% in 2015, 15.7% in 2016 and 16.5% in 2017 while the depreciated real effective exchange rates in 2015 was 70.83, when 80.35 and 85.62 were recorded in 2016 and 2017 respectively. This trend contradicted economic postulations that predicted inverse relationship between inflation and unemployment; a depreciated real depreciation was expected to improve and boost real GDP which in turn expected to have a drastically decline in the rate of unemployment via increase in export. Most existing studies have addressed the effect of inflation a...

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“…The validity and stability of this empirical relationship is still debated nowadays. The majority of recent literature (Russell and Banerjee, 2008;Paul, 2009;Stock, 2011;IMF, 2013;Ojapinwa and Esan, 2013;Watson, 2014;Yellen, 2015;Kiley, 2015;Krugman, 2015;Coibion and Gorodnichenko, 2015;Blanchard, 2016;Mazumder, 2018;Murphy, 2018;Ball and Mazumder, 2019;Sovbetov andKaplan, 2019a, 2019b) reports a time and cross-section variability in the Phillips Curve. However, reasons for this variability have not been clearly addressed yet.…”

Section: Introductionmentioning

confidence: 99%

Phillips Eğrisi’nin Sakin ve Durgunluk Dönemlerde Tahmini: Panel Analizinden Kanıtlar

Soybetov¹

2019

ISTJECON

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The empirical literature that covers Phillips Curve analysis during recessionary periods is notably scant. The Great Recession has rekindled a debate on the validity and stability of the Phillips Curve which is still ongoing. The basis for this debate is the observation that real activity dropped sharply without causing a drop in inflation. This paper carries out an empirical analysis for the classical expectation-augmented Phillips curve model across 41 countries from1980-2016 by distinguishing tranquil and recessionary periods separately. Based on the results of the research, the paper finds that dynamics of Phillips Curve changes during recessionary periods and the empirical relationship becomes no longer valid. These findings support the ongoing debate about the missing disinflation and collapse of the Phillips curve, but only during the recessionary periods. In the case of tranquil periods, the empirical relationship still seems to be valid. Moreover, the paper also observes that both backward-looking and forward-looking fractions of inflation gain weight and significance during recessionary periods. However, the paper remains indecisive about which exact fraction gains more weight and significance as the panel model does not incorporate these two fractions of inflation in a single hybrid framework simultaneously.

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Does Philips Relations Really Exist in Nigeria? Empirical Evidence

Cited by 8 publications

References 39 publications

Causes of failure of the Phillips curve: Does tranquillity of economic environment matter?

Causes of failure of the Phillips curve: Does tranquillity of economic environment matter?

Issues of Unemployment in Nigeria: Effect of Real Exchange Rate and Inflation Interaction

Phillips Eğrisi’nin Sakin ve Durgunluk Dönemlerde Tahmini: Panel Analizinden Kanıtlar

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