Determinants of Unemployment in Bangladesh: A Case Study

Abstract

Abstract:A very important issue that plays a crucial role in development of the economies is the underutilization of its human capital i.e. unemployment. This paper investigates macroeconomic determinants of unemployment rate in Bangladesh economy for the period of 2000-2011 using Simple Single Equation Linear Regression Model (SELRM). The variables selected for the study are Unemployment rate, GDP growth rate, Exchange rate and Inflation rate (CPI based). The results of regression analysis showed significant impact of all the variables. Our main finding includes that Inflation rate stimulate unemployment positively and GDP growth rate and Exchange rate has negative impact on unemployment. Keywords: Unemployment rate, GDP growth rate, Exchange rate, Inflation rate. Introduction:Unemployment is one of the major problems in almost all the countries of the world. It has been the most consistent problem which is facing by all industrially advanced as well as poor countries. Unemployment is defined as the condition of having no job or being out of work or proportion of people which are able to work and actively searching jobs but they are unable to find it. Some of the very common causes of unemployment in Bangladesh and other developing economies are the technological changes, contribution of women in labor force, demographic structure, economic conditions, production of electricity (especially in Bangladesh), immigration from rural area's towards towns and cities. A decrease in the growth of the economies because of the economic recession of October 2008 is a major reason of increasing rate of unemployment for both developed and developing countries. According to theory, there is a positive relation between employment and the economic growth of countries. Economic growth is a vital factor that affects the unemployment. Theoretically a positive relation should exist among growth and employment or negative with unemployment. The economic theory, which converse on the subject of the relationship between unemployment and the economic growth is named as Okun's law. He studied the trade off among the real GNP and the unemployment. According to the theory there is an inverse relation between growth and the unemployment. The relationship between unemployment and the inflation is termed as Philips curve in the economic theory and was developed in 1958 by A. W. H. Philip. He discovered positive relationship between the two variables. Individually, inflation and unemployment both have negative effects on the individuals. With the globalization and open trades, exchange rate has started playing a vital role in the economy which has a direct effect on the unemployment level in a country. With devaluation, exports tend to boost and as a result expenditure on imports are reduced. By this, inflow of foreign currency is enhanced economies move towards growth and consequently the rate of unemployment declines. Objectives of this study:In Bangladesh GDP growth rate, exchange rate and inflation rate are the most important economic var...

Military Expenditures and Unemployment Nexus for Selected South Asian Countries

“…The results are consistent with the previous studies of Salman and Shukur (2014) in the context of Finland, Chowdhury and Hossain (2014) in Bangladesh, Arslan and Zaman (2014) in Pakistan, Karfakis et al (2014) in Greece, Hogrefe and Sachs (2014) in Europe etc. Similarly, FDI played a vital role to decrease unemployment rate in SAARC region, as if there is one percent increase in FDI, unemployment decreases by -0.553 %.…”

The Determinants of Unemployment Rate in Jordan: A Multivariate Approach

“…This result is consistent with the results of both studies (Maqbool et al, 2013) and (Zeb et al, 2014), but it is inconsistent with the results of Chowdhury and Hossain (2014) and Rafiq et al (n.d).…”

Cointegration between macroeconomic factors and the exchange rate USD/CNY

“…They revealed the results of the Johansen cointegration technique show that the interest rate and GDP have a negative effect on exchange rate in Thailand. Chowdhury and Hossain (2014) studied the association of interest rate and exchange rate of Bangladesh. They revealed that a positive association exists among interest rate and exchange rate in Bangladesh.…”