Inflation, income distribution nexus. A pathway to Nigeria's long term socioeconomic development. A chain rule effect

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Abstract

This study is aimed at analyzing income distribution as a pass through for the effect of inflation on socio-economic development in Nigeria. Annual time series data from 1981 to 2023 was utilized. The Autoregressive Distributed Lag (ARDL) Bounds testing procedures was used including pre and post-test to ensure the accuracy of this method. Additionally, the chain rule was equally used to determine the transmission mechanism (channel) and the interactive level of income distribution on socio-economic development. The results indicates the presence of a long-run relationship among inflation, income distribution, and socio-economic development, as confirmed by ARDL Bounds test. The result shows that inflation has a negative but significant impact on socio-economic development in Nigeria with income distribution serving as a transmission channel (mechanism). Based on these findings, it is suggested that the government should implement various strategies and policies, including redistribution policies, plans that will promote socio-economic development. JEL classification: E31, D30, O11, C1

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