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The unemployment rate and its determinants: the Malaysian case

Author

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  • Ghafar, Aiman
  • Masih, Mansur

Abstract

The focus of this paper is on the determinants of unemployment rate. Malaysia is used as a case study. The standard time series techniques are used for the analysis. The variables are bound together by theoretical relation as evidenced in their being cointegrated. Based on the variance decomposition analysis, the unemployment rate is driven mostly by inflation rate followed by the growth of population and private consumption expenditures. The results are consistent with the well-known ‘Phillips curve’ (Phillips,1958). The results are plausible and contain strong policy implications for the emerging countries like Malaysia.

Suggested Citation

  • Ghafar, Aiman & Masih, Mansur, 2017. "The unemployment rate and its determinants: the Malaysian case," MPRA Paper 110220, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:110220
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    References listed on IDEAS

    as
    1. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    2. Gianni Amisano & Massimiliano Serati, 2003. "What goes up sometimes stays up: shocks and institutions as determinants of unemployment persistence," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(4), pages 440-470, September.
    3. Guy Debelle & James Vickery, 1998. "Is the Phillips Curve A Curve? Some Evidence and Implications for Australia," The Economic Record, The Economic Society of Australia, vol. 74(227), pages 384-398, December.
    4. Rukhsana Kalim, 2003. "Population and Unemployment: A Dilemma to Resolve," The IUP Journal of Applied Economics, IUP Publications, vol. 0(3), pages 7-15, August.
    5. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    6. A. W. Phillips, 1958. "The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861–1957," Economica, London School of Economics and Political Science, vol. 25(100), pages 283-299, November.
    7. Fumitaka Furuoka, 2007. "Does the “Phillips Curve” Really Exist? New Empirical Evidence from Malaysia," Economics Bulletin, AccessEcon, vol. 5(16), pages 1-14.
    8. Mr. Vincent Hogan, 1998. "Explaining the Recent Behavior of Inflation and Unemployment in the United States," IMF Working Papers 1998/145, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Determinants of unemployment rate; VECM; VDC; Malaysia;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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