The effect of real exchange rate on unemployment

Bakhshi, Zahra; Ebrahimi, Mohammad Reza

doi:10.33844/mbr.2016.60281

Cited by 16 publications

(16 citation statements)

References 11 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The Johansen cointegration test for the macro variables revealed that the variables are cointegrated which is in line with economic expectation that state that most macro-economic variables tends to exhibit long run relationship (Kwon and Shin, 1999). Since the variables are integrated of order one and also cointegrated, the FMOLS Bakhshi and Ebrahimi (2016) for Iran economy. The implication of our result shows that the Nigerian economy depends more on Importation.…”

Section: Data Analysis and Discussion Of Resultssupporting

confidence: 76%

On the Determinants of Unemployment Rate in Nigeria: Evidence from Fully Modified OLS and Error Correction Model

Adenomon¹,

Okoro-Ugochukwu²,

Adenomon³

2018

Preprint

View full text Add to dashboard Cite

This study employed the Fully Modified Ordinary Least Squares (FMOLS) and the Error Correction Model (ECM) to investigate the long-run and short-run determinants of unemployment rate in Nigeria. To achieve this annual data on unemployment rate, inflation rate, interest rate, exchange rate and population growth from 1981 to 2016 was collected from Central Bank Statistical Bulletins and the World Bank website. The ADF test revealed that the macroeconomic variables are stationary at first difference while the Cointegration test revealed that the variables are cointegrated. Using unemployment rate as dependent variable, the FMOLS model revealed that exchange rate and population growth are positively significantly related to unemployment rate, interest rate and inflation rate were negatively related to unemployment rate but only interest rate was significant. The short run relationship revealed that the coefficient of the ecm(-1) is negative and statistically significant at 5% level indicating that the system corrects its previous period disequilibrium at the speed of 48.93% yearly. This study concludes that high exchange rate and population growth can lead to increase in unemployment rate in Nigeria while the government should develop the industrial sector and non-oil sector in order to generate employment and boost export in Nigeria.

show abstract

Section: Data Analysis and Discussion Of Resultssupporting

confidence: 76%

On the Determinants of Unemployment Rate in Nigeria: Evidence from Fully Modified OLS and Error Correction Model

Adenomon¹,

Okoro-Ugochukwu²,

Adenomon³

2018

Preprint

View full text Add to dashboard Cite

show abstract

“…(2) A one SD impulse to UNEMP initially decreases lnEX up to 2 periods, and this response then sharply declines and hits the zero-line value in the period 2-3 from where it remains in the negative region during the period 3-12, albeit with an increasing tendency. This means that innovations to UNEMP will have asymmetric impacts on lnEX in the short as well as long-run and such findings validate the outcomes of (Arshad and Ali, 2016;Bakhshi and Ebrahimi, 2016). (3) A one SD innovation of INF to UNEMP initially hits the steady-state value in the 1 st period, and then sharply declines up to the 3 rd period and remains in the negative region up to the 8 th period where it again hits the steadystate level, and after that, it remains in the positive region but moves towards the zero line over periods.…”

Section: Results Of Impulse Responsessupporting

confidence: 78%

“…However, there are mixed findings exist about the correspondence between exchange rate-unemployment in the empirical macroeconomics literature. Some empirical studies have concluded that the connection between exchange rate vs. unemployment is inverse and these studies include (Chowdhury and Hossain, 2014;Kaur, 2014;Bakhshi and Ebrahimi, 2016); however, other empirical studies suggest that the relationship between the analyzed factors is positive, and this result has been confirmed from the findings of the study conducted by (Islam and Sajalal, 2019).…”

Section: Introductionmentioning

confidence: 89%

See 1 more Smart Citation

The Relationship Between Unemployment and Economic Growth in South Africa: VAR Analysis

Khalid¹,

Trnc²

2021

Forman J. Econ. Stud.

View full text Add to dashboard Cite

This article aims to study real GDP, inflation rate, exchange rate and their impacts on the unemployment rate in South Africa by considering the annual time-series data covering the period 1980-2018. The findings of the Johansen approach to co-integration concluded that there was no evidence of a long-run connection among the variables. The findings of Granger causality reported that there was bidirectional causality between the pairs of real GDP vs. unemployment rate, exchange rate vs. unemployment rate, and inflation rate vs. unemployment rate; however, a unidirectional causality was found in the pairs of real GDP vs. exchange rate and inflation rate vs. exchange rate. The findings of impulse-responses demonstrated that there was a negative significant response of the exchange rate to the unemployment rate in the long-run; conversely, the response of real GDP to the unemployment rate was positive significant in the long-run. Furthermore, the findings of variance decompositions reported that all regressors strongly predict the unemployment rate both in the short and long-run. The study suggested that the government should provide job-readiness skills, business awareness, technological knowledge, and training programs to its population to ascertain unemployment reduction. The study also suggested that the South African government should create a supportive environment and flexible labor market policies that attract small businesses and private-sector investment which ultimately strengthen the entrepreneurial activity with new entrepreneurial actors in order to create job opportunities and absorb a large pool of unemployed youth.

show abstract

“…An increase of RER by 10% increases unemployment by 5.5%, at a percent significance level and real exchange rate depreciation increases unemployment rate in ten Asian countries. This study has contrary outcome with Bakhshi and Ebrahimi (2016) where the relationship between real exchange rate and unemployment in Iran using the annual data of 30 years (from 1981 to 2012) demonstrated that there was a negative relationship between unemployment and exchange rate and economic growth had a significant and positive effect on unemployment. This finding agreed with Atya (2017) who estimated the effect of real exchange rate on unemployment in the Egyptian economy during the period 1985-2015 using three methods to estimation such ARDL, FMOLS and DOLS.…”

Section: Real Exchange Rate-unemployment Relationship Theorycontrasting

confidence: 76%

Issues of Unemployment in Nigeria: Effect of Real Exchange Rate and Inflation Interaction

Olanrewaju

2019

Quarterly Journal of Econometrics Research

View full text Add to dashboard Cite

Article History KeywordsInflation Real exchange rate Unemployment Generalized moment method Marginal effect Interaction of real exchange rate and inflation.Contribution/Originality: This study contributes to the existing studies by distinguishing itself identifying the simultaneous impact of these two fluctuating variables (inflation rate and real exchange rate ) on unemployment, unlike existing literatures which addressed these impacts on unemployment separately and assessing how inflation influences the impact of real exchange rate on unemployment in Nigeria. The study adopts descriptive analysis and generalized method of moment. 1969). Another argument is that trade-off between inflation and unemployment exist in long run because of money supply and productivity growth leads to decrease in unemployment, while supply shock like oil prices leads to increase in unemployment and that increase in productivity growth causes decrease in inflation and also fall in unemployment (Tang and Lean, 2009; Karanassou and Sala, 2010).The relationship between exchange rate and unemployment is controversial, if positive or negative relationship exists between the two variables. Literature establishes that changes in real exchange rates have tendency of impacting the reallocation of resources between sectors of the economy as they reflect changes in relative prices of domestic and foreign goods which influence employment in an economy. Trade theory suggest that a depreciation of real exchange rate increases the competitiveness of the country's exports and hence the demand for labour increases. On the other hand, a depreciation of real exchange rate increases the cost of intermediate inputs which might offset the first effect such affect production level adversely which tends to reduce competitiveness of the country export and hence, demand for labour decreases (Demir, 2010;Feldmann, 2011).In Nigeria, statistics revealed that between 2013 and 2014, the unemployment rate increased from 16.7 to 17.1, despite an increase in annual real GDP from 5.4% to 6.3% with a decrease in the annual inflation from 8.5% to 8% whereby an improvement of real effective exchange rate occurred from 74.20 and 69. 51. Subsequently, unemployment further reveled 17.6 %, 18 % and 18.5% in 2015, 2016 and 2017 respectively. The corresponding real GDP were 2.7%, -1.6% and 0.8% in 2015, 2016 and 2017 respectively. The purchasing power of households further declined as a result of a continuous increase in the annual inflation with 9% in 2015, 15.7% in 2016 and 16.5% in 2017 while the depreciated real effective exchange rates in 2015 was 70.83, when 80.35 and 85.62 were recorded in 2016 and 2017 respectively. This trend contradicted economic postulations that predicted inverse relationship between inflation and unemployment; a depreciated real depreciation was expected to improve and boost real GDP which in turn expected to have a drastically decline in the rate of unemployment via increase in export. Most existing studies have addressed the effect of inflation a...

show abstract

The effect of real exchange rate on unemployment

Cited by 16 publications

References 11 publications

On the Determinants of Unemployment Rate in Nigeria: Evidence from Fully Modified OLS and Error Correction Model

On the Determinants of Unemployment Rate in Nigeria: Evidence from Fully Modified OLS and Error Correction Model

The Relationship Between Unemployment and Economic Growth in South Africa: VAR Analysis

Issues of Unemployment in Nigeria: Effect of Real Exchange Rate and Inflation Interaction

Contact Info

Product

Resources

About