Inflation Theory: A Theoretical Review of Demand-Pull and Cost-Push Inflation Effect on Nigeria Economy

Abstract

Inflation has become a pressing issue in Nigeria, affecting the cost of living and infrastructure development. Despite tight fiscal and monetary measures, inflation continued to rise at unprecedented rates in Nigeria. The present seminar paper aims to provide insight into the theoretical understanding of Demand-pull and Cost-push inflation and explore its causes and effects on the economy and individuals. Using the Desk research method, the researcher explores empirical data from 33 published articles for the study. The empirical literature reviewed found that Demand-pull and cost-push inflation are different and have different causes and effects on individuals and the National economy. It was found that Demand-pull inflation is driven by excess demand, leading to higher prices, while Cost-push inflation is caused by increased production costs, which result in higher prices. It was concluded that Inflation is a complex economic phenomenon that significantly impacts individuals and businesses. Understanding the differences between demand-pull and cost-push inflation is essential for policymakers and economists in formulating strategies to combat inflation and maintain a stable economy. The researcher recommended, amongst others, that developing appropriate policies and addressing the root causes of inflation make it possible to mitigate inflation effects and promote sustainable economic growth.