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

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  • Igwe, Justice Ibeabuchi

    (Department of Economics, Faculty of Social Science, Ignatius Ajuru University of Education, Port Harcourt, Rivers State, Nigeria)

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.

Suggested Citation

  • Igwe, Justice Ibeabuchi, 2021. "Empirical Evaluation of the Causality between Real GDP and Unemployment Rate in Nigeria," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 8(8), pages 17-24, August.
    • Handle: RePEc:bjc:journl:v:8:y:2022:i:8:p:17-24
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    References listed on IDEAS

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    1. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
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