On the stability of the Phillips Curve in Nigeria: Does the Lucas Critique apply?

This study seeks to examine the stability of the Phillips Curve in Nigeria, as well as to ascertain the applicability of the popular Lucas Critique to the Phillips Curve in Nigeria. Using quarterly data from 1990Q1 to 2018Q3, the model is estimated with robust OLS that accounts for possible heteroscedastic and autocorrelation standard errors. The empirical results reveal that the standard empirical Phillips Curve appears not to apply strictly in the Nigerian case and this result is in conformity with the existing literature, particularly from developing countries. It also shows that an increase in economic output has the tendency of reducing inflationary pressure in the Nigerian economy. The study, therefore, recommends that fiscal and monetary policy must improve on measures and policies that could enhance domestic productivity in order to tame inflationary pressure in the Nigerian economy.