Causality of Unemployment and Macroeconomics

Causality of Unemployment and Macroeconomics

Endashaw Sisay

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.

Free Full-text PDF

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Global journal of Economics and Business Administration, 2019, 4: 24.DOI:10.28933/gjeba-2019-12-2105 (This article has been retracted from Global journal of Economics and Business Administration. Please discard all information from us and do not use it for any purposes.)


1. Abdulbaset, M. H, Veronika, S.,Vladimír, G. and Denis, H. ARDL investment model of Tunisia[J]. Theoretical and Applied Economics, 2013, 2(579): 57-68.
2. Adam, P. B., and Mirosława, Z. (2011). Foreign Direct Investment and Unemployment: VAR Analysis for Poland in the Years 1995-2009(J). European Research Studies, 2011, XIV (1).
3. Alrabba, M.I.M. The Determinants of Unemployment Rate in Jordan: A Multivariate Approach[J]. International Journal of Economics and Finance, 2017, 9(11)
4. Anup, S. Relationship between Inflation and Unemployment in India: Vector Error Correction Model Approach(J). International Journal of Advance Research and Innovative Ideas in Education, 2017, 3(6).
5. Asif, K. and Aurangzeb. Factors effecting unemployment: A cross country analysis [J]. International Journal of Academic Research in Business and Social Sciences, (2013), 3(1), 219.
6. Bekhet, H.A. & Al-Smadi, R.W. Determinants of Jordanian foreign direct investment inflows: Bounds testing approach [J]. Economic Modeling, 2015, (46): 27-35.
7. Dilek, S. Determinants of Unemployment: Empirical Analysis for China[J]. The Journal of Academic Social Science, 2016, 6(4).
8. Fouzeia, M.A, Fuadah. J,Siti, N. M. D., and Asma, A. R. Short and Long Term Relationship between Economic Growth and Unemployment in Egypt: An Empirical Analysis(J). Mediterranean Journal of Social Sciences, 2015, 6(4).
9. Granger, C.W. Investigating causal relations by econometric models and cross-spectral methods[J]. Journal of the Econometric Society, 1969 37(3): 424-438.
10. Malika, S, Faisal, F. & Nil G.R. Influence of energy use, foreign direct investment and population growth on unemployment for Russian Federation[C]. 9th International Conference on Theory and Application of Soft Computing, Computing with Words and Perception, 2017: 22-23.
11. Min,B. S. and Guna, R. B. Selecting appropriate methodological framework for time series data analysis[J]. The Journal of Finance and Data Science, 2018, 4(71).
12. Muhammad, S.M., TahirMahmood, A.S. & Bhalli,M.N. Determinants of unemployment Empirical Evidences from Pakistan[J]. Pakistan Economic and Social Review, 2013. 51(2) 191-207.
13. Nasridini,A.& Behrooz,G. Factors Influencing High Unemployment in Tajikistan [J]. International Journal of Social Science Studies, 2015, 3(6).
14. Pesaran, M.H., Shin, Y., & Smith, R.J. Bounds testing approaches to the analysis of level relationship(J). Journal of Applied Economics, (2001), 16, 289-326.
15. Safet,K., Boris,S. and Milos,M. Long-term impact of foreign direct investment on reduction of unemployment: panel data analysis of the Western Balkans countries[J]. Journal of Applied Economics and Business Research, 2015, 5(2): 112-129.