Analysis of inflation, unemployment, and the applicability of Philip’s curve in Uganda

Abstract

This dissertation presents an examination of the relationship between inflation, unemployment, and the applicability of the Philips curve in Uganda. Contrary to the conventional economic theory, the study found a positive relationship between inflation and unemployment in Uganda, challenging the traditional Philips curve. Inflation had an average increase rate of 8.1% while unemployment rate increased at an average rate of 3.3%. Employing time series analysis and cross-sectional examination, this study analyzed dynamics of inflation and unemployment from 1991 to 2022. The results unveiled a compelling narrative of economic intricacy, wherein higher inflation rates corresponded to increased unemployment rates and vice versa. The implications of these findings call for a nuanced approach that accounts for the unique structural dynamics of inflation in Uganda to include supply-side shocks and the informal labor market. The study contributes to the economic literature by challenging the traditional Philips curve. It also underscores the imperative for policymakers to consider a diversified set of policy instruments, embrace interdisciplinary collaboration, invest in education and skills development, and closely monitor global economic trends.