Throughout the years, inflation, unemployment rate, and population growth are macroeconomic

indicators and determinants of economic growth and development. The impacts of these
macroeconomic indicators on economic growth were seen in various economies (Tenzin, 2019). Hence,
it only shows that these macroeconomic indicators are not just a primary concern of less
developed and developing countries but also in developed countries (Ademola & Badiru, 2014).
Further, these indicators can transpire either a positive or negative growth and development of a
certain economy of specific
countries.

Inflation is defined as a situation in which prices change due to the increase in the production cost of
goods over a given period. If inflation is too high, then an economy might suffer macroeconomic
imbalances (United Nations, 2007). The relationship between inflation and unemployment was
established by Philips (1958), which shows an inverse relationship between inflation and
unemployment; when inflation increases, then itcorresponds to a low level of unemployment.

Domestic inflation can theoretically be isolated from monetary shocks and influences from and to the
rest of the world. This is especially true in a flexible exchange rate regime. The argument rests on the
adjustment mechanism of nominal macro-variables that respond to the initial monetary imbalances. An
increase in the money supply of a country, for instance, leads to an increase in inflation and the nominal
interest rate in that country. Under uncovered interest rate parity, the nominal exchange rate
depreciates and inflationary pressure need not spill over to other countries. Inflation is, hence, over the
long run, a domestic monetary phenomenon and the transmission of monetary disturbances is
nonexistent (Lothian, 1992).