Economic growth, inflation and unemployment in Africa: an autoregressive distributed lag bounds testing approach, 1991–2019

Abstract

PurposeUnemployment is one of the major challenges facing most countries, including Africa as a continent. Seeking how to reduce unemployment, debt, inflation and increase gross domestic product (GDP), foreign direct investment (FDI) and gross capital formation in the continent has been an agenda of governments, policy makers and economists to. This study examines the relationship between economic growth, inflation, debt, FDI, gross capital formation, labor force, population and unemployment in Africa.Design/methodology/approachAn updated panel dataset of 29 African countries was selected from different regions from 1991 to 2019. These countries were selected based on their unemployment, population growth and inflation rates. The Pesaran cross-sectional dependence and panel unit root test (the Dickey–Fuller cross-sectional supplemented and the Im-Pesaran-Shin cross-sectional) were applied. Further, the panel Autoregressive Distributed Lag (ARDL) model (Bounds test) and pooled mean group (PMG) estimator were utilized in this work.FindingsThis shows that economic growth, debt, labor force and population have a positive relationship with unemployment in the long run. Therefore, an increase in these variables generates an increase in the selected African countries' unemployment growth. In contrast, inflation, FDI and gross capital formation have a negative relationship with unemployment in the long run, which implies that an increase in these variables reduces unemployment in the selected African countries.Research limitations/implicationsThis study has potential limitations because some data from the countries are not up to date and some years are missing from the data.Practical implicationsThis study contributes to understanding unemployment and Okun's law in the African economy. This study shows that an increase in economic growth leads to a rise in unemployment, while an increase in inflation leads to a decrease in unemployment.Originality/valueThis paper provides an insight into the major factors that increase and reduces unemployment for government and policy marker to take the adequate measure.

Unemployment, Economic Growth, and Government Expenditure in West Java: Perspectives from Dynamic Panel Model

“…Some literature shows a close negative relationship between economic growth and unemployment (Muslim, 2014;Neifar, 2022;Nurcholis, 2014). However, there are several other literature that explain the positive relationship between economic growth and unemployment, so the approach using Okun's Law cannot be validated (Anggraini, 2021;Gómez & Irewole, 2023;Salsabella et al, 2020). From the description above, there are still gaps and discrepancies in the findings of previous studies.…”

Guest editorial: The new economy and employment in Africa: an introduction

“…The selected papers have positively and constructively accommodated comments from the editors and referees, which have led to substantial improvements of the original versions of the manuscripts, so that the corresponding manuscripts are critically positioned on the extant contemporary literature, theoretically informed, empirically robust and policy-worthy. The nine selected articles represent distinct or standalone contributions to knowledge, which can be discussed in more perspective in four main strands, notably (1) ICT adoption and employment (Osabohien, 2024; Asongu and Odhiambo, 2024); (2) creativity and innovation (Medase and Savin, 2024; Otache, 2024); (3) job creation, satisfaction and career advancement (Ayimah et al , 2024; Fitong Ketchiwou and Naong, 2024; Gollagari et al , 2024) and (4) institutional and economic growth perspectives of employment and entrepreneurship (Gómez and Irewole, 2024; Hossain et al , 2024).…”

“…at national and institutional levels) and supportive cultural software play a fundamental role in providing an enabling environment for both entrepreneurial activities and the development of SMEs. Gómez and Irewole (2024) have examined nexuses between debt, inflation, foreign direct investment (FDI), labor forces, population, economic growth and unemployment in Africa. According to the findings, debt, population, labor force and economic growth positively affect long-run unemployment.…”