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Relationship between Unemployment and Macroeconomics Aggregates: Evidence from Bangladesh

Author

Listed:
  • Mohammad Mushfiqul Haque MUKIT
  • Assim Ibrahim ABDEL-RAZZAQ
  • Mohammad Safiqul ISLAM

    (Jahangirnagar University
    Prince Mohammad Bin Fahd University
    Jahangirnagar University)

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.

Suggested Citation

  • Mohammad Mushfiqul Haque MUKIT & Assim Ibrahim ABDEL-RAZZAQ & Mohammad Safiqul ISLAM, 2020. "Relationship between Unemployment and Macroeconomics Aggregates: Evidence from Bangladesh," Journal of Economics and Financial Analysis, Tripal Publishing House, vol. 4(2), pages 45-61.
    • Handle: RePEc:trp:01jefa:jefa0040
    DOI: 10.1991/jefa.v4i2.a36
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    References listed on IDEAS

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    More about this item

    Keywords

    Unemployment Rate; Economic Growth; FDI; Inflation Rate; Co-integration.;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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