IIARD International Institute of Academic Research and Development

IIARD International Journal of Economics and Business Management (IJEBM )

E-ISSN 2489-0065
P-ISSN 2695-186X
VOL. 11 NO. 2 2025
DOI: 10.56201/ijebm.vol.11.no2.2025.pg219.247

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Assessment of the Impact of Inflation and Unemployment on the Nigerian Economy: Some Mathematical Systems Predictions for Politico-Economic Growth and Development

Rex Oforitse ARUOFOR, PhD Daniel Risiagbon OGBEIDE, PhD

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Abstract

Economic theory suggests that the rate of inflation rises as unemployment rate falls. This has been formalized according to what is known as the Phillips Curve. However, economists such as Milton Friedman and Edmund Phelps have disapproved of Phillips curve thesis, stating that the trade-off between unemployment and inflation only existed in the short-run. Other Economists over the years, have disproved the authenticity of the trade-off thesis as postulated by Phillips by observing that both high inflation rates and high unemployment rates were discovered to co-exist, giving rise to what has come to be known as stagflation. The existing literature refers to unemployment and inflation as constituting a vicious circle that explains the endemic nature of poverty in developing countries. It has been suggested that continuous improvement in productivity which brings about the adequate supply of goods and services, is the surest way to breaking the vicious circle. This study therefore, applied the Total Differential Modeling approach (ecostatometrics) to reveal the structure of the Nigerian economy and applied Markov Chains analysis to reveal the transition matrix of the economy; used Linear Programming to maximize and minimize the Transition matrix with a view to maximize the chances of real output, growth, employment and purchasing power as well as minimizing the chances of inflation, inflation rate, unemployment rate and penchant for imports among others. The predicted weights were used to formulate a Linear Goal Programming model of the Nigeria economy to elicit the policies and strategies that should be adopted and pursued if the Nigerian economy must grow optimally and develop in real terms and break the vicious circle between unemployment and inflation rates. The result confirmed that Nigeria should restructure and diversify in order to grow the economy and recommendations have been made in that direction.

keywords:

Inflation, inflation rate, Unemployment rate, employment, economy, total, differential modeling approach, Markov Chains, Linear Goal Programming, Growth and, Development

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