Relationship between Unemployment and Macroeconomics Aggregates: Evidence from Bangladesh

Mohammad Mukit, Assim Ibrahim Abdel-Razzaq and Mohammad Safiqul Islam ()
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Mohammad Safiqul Islam: Jahangirnagar University

Journal of Economics and Financial Analysis, 2020, vol. 4, issue 2, 45-61

Abstract: This paper examines relationship of unemployment rates with other macroeconomic aggregates in Bangladesh over 1991-2019 using robust econometric analyses. It sheds a light on the fact that GDP growth rate, inflation, and foreign direct investment flows have statistically significant impacts on unemployment rate both in short-run and long-run. More specifically, the paper documents that unemployment rate, GDP growth rate, inflation rate and foreign direct investment flows are co-integrated in long-run at 5% significance level. Using Vector Error Correction analysis, the paper finds that co-integrated series converge it their long-run equilbruim at a speed of 17.24% per annum at 1% significance level. In case short-run, the study finds that a unit increase in GDP growth rate decreases unemployment by approximately 0.0159 units in short-run at 1% statistically significance level. Likewise, a unit increase in inflation rate will lead approximately 0.004 units drop in unemployment rate at 10% significance level. Plus, it also observes that a unit in Foreign Direct Investment flows causes 0.005 units decrease in unemployment rate in short-run at 5% significance level.

Keywords: Unemployment Rate; Economic Growth; FDI; Inflation Rate; Co-integration. (search for similar items in EconPapers)
JEL-codes: B22 B23 E24 E26 E31 J24 R23 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:trp:01jefa:jefa0040

DOI: 10.1991/jefa.v4i2.a36

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