Research Article of Global journal of Economics and Business Administration
Causality of Unemployment and Macroeconomics
Lecturer, Department of Economics, Mizan Tepi University
In order to test the wellbeing and development of a given nation economy, unemployment level is a primary macroeconomic pointer. It is considered as forgone output which denies the fundamental assets of government that required creating the economy. Thus, the objective of the study was to investigate the long-run and short-run causality between unemployment and macroeconomic variables. Resulting to utilizing the Augmented Dickey-Fuller to test for unit root this investigation utilized Auto Regressive Distributed Lag limits testing approach and Vector Error Correction Model granger causality test to inspect the time arrangement information over the time of 1984/85-2018/19. Relapse result recommends that since quite a while ago run causation running from joblessness to the recorded macroeconomic factors. In the short run there is significant granger causality from foreign direct investment and inflation rate to unemployment rate. Moreover, from unemployment to real gross domestic product and external debt in the short run. Finally, the study suggests the government should increase the level of aggregate supply, create conducive environment that entice more foreign direct investment and borrow only for productive purpose to form more business and assimilate an expensive pool of unemployment populace.
Keywords: ARDL model, Granger Causality, Vector Error Correction Model, Unemployment.
How to cite this article:
Endashaw Sisay. Causality of Unemployment and Macroeconomics. Global journal of Economics and Business Administration, 2019, 4: 24.DOI:10.28933/gjeba-2019-12-2105
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