Empirical Evaluation of the Causality between Real GDP and Unemployment Rate in Nigeria

Justice Ibeabuchi Igwe
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Justice Ibeabuchi Igwe: Department of Economics, Faculty of Social Science, Ignatius Ajuru University of Education, Port Harcourt, Rivers State, Nigeria

International Journal of Research and Scientific Innovation, 2021, vol. 8, issue 8, 17-24

Abstract: This study examined the causality between Real GDP and unemployment rate in Nigeria. The hypothesis of this study is anchored on Okun’s law. Data from the Central Bank of Nigeria statistical bulletin and National Bureau of Statistics was collected on Real GDP and unemployment rate from 1981-2019. This study employed the correlation test and pairwise causality test to determine the relationship-causality between Real GDP and the Unemployment rate in Nigeria. This study found a 65.93 percent correlation between Real GDP and the unemployment rate. The pairwise causality result shows that there is unidirectional causality between the unemployment rate and Real GDP. The transmission of causality asserts that unemployment granger causes Real GDP. This implies that employment of factor resources brings about high productivity that leads to an increase in Real GDP hence growth. This paper recommends the adoption of fiscal and easing monetary policy to boost firm’s absorptive capacity in the country. This policy will stimulate job creation which will in turn accelerate growth.

Date: 2021
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