Macroeconomic determinants of unemployment in Nigeria (1970-2013)
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Date
2016
Authors
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Journal ISSN
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Publisher
Economics, Obafemi Awolowo University
Abstract
The study examined the trends and patterns of unemployment rate, economic growth, inflation rate and exchange rate; and examined the effect of economic growth, inflation rate, and exchange rate on unemployment rate in Nigeria. It also examined the dynamic interaction effects of unemployment rate, economic growth, inflation rate and exchange rate in the country. These were with the view to determining the macroeconomic impacts of economic growth, inflation rate, exchange rate, on unemployment rate in Nigeria.
Secondary data were used for the study. Annual data on economic growth (proxied by real gross domestic product), trade openness (sum of exports and imports as a fraction of gross domestic product), investment (proxied by fixed capital formation), and public debt were sourced from the Central Bank of Nigeria Statistical Bulletin. Data on inflation rate (proxied by consumer price index), exchange rate, and population growth rate were obtained from the World Development Indicator (WDI) of the World Bank while data on unemployment rates were sourced from the Nigeria Bureau of Statistics (NBS). Data collected were analyzed using tables, graphs, Dynamic Ordinary Least Square (DOLS) and Vector Error Correction Model (VECM).
The results of the trends and patterns showed that unemployment rate, exchange rate, inflation rate as well as GDP fluctuates over the study period with more oscillations in inflation rate. Results further showed that real GDP had a negative and statistically significant effect on unemployment rate (t = -2.4, p < 0.05). Inflation rate had a negative but statistically insignificant effect on unemployment rate in Nigeria (t= -1.8, p > 0.05). Exchange rate was found to be positively related to unemployment rate and statistically insignificant in determining unemployment rate in the country (t=1.58, p>0.05). The results also showed that the innovative shocks to unemployment rate accounted for 100% variation in unemployment rate in the first period but declines gradually towards the 10th period though with more percentage variations throughout the periods compared to the variations due to shocks in other variables. However, the variations in unemployment rate due to innovative shocks in Real GDP, fixed capital formation and CPI inflation rate are minimal compared to other variables in the model. The variations in Real GDP as a result of the innovative shocks to unemployment rate was minimal but with its highest variation in the 9th period (2.53%). However, a one-standard deviation shock to inflation rate resulted in a minimal variation in Real GDP over the study period while a one standard deviation shock to unemployment rate was most felt on inflation rate in the first period(2.03%) but the variation declines over the ten periods. Accounting shocks to exchange rate produced the highest variation in inflation rate in the tenth period (2.47%) while the variation in inflation rate due to a one standard deviation shock in unemployment rate was least in the tenth period (0.65%). However, the result of the study also revealed that the variations in exchange rate increases consistently from the 1st period to the 10th period due to a one standard deviation shock in the unemployment rate.
The study concluded that economic growth was statistically significant in determining unemployment rate in Nigeria while inflation rate and exchange rate were statistically insignificant in determining unemployment rate in Nigeria.
Description
xiii,85p
Keywords
Economic growth, Unemployment, Inflation, Macroeconomic, Exchange rate
Citation
Aromolaran, O.(2016). Macroeconomic determinants of unemployment in Nigeria (1970-2013). Obafemi Awolowo University