Macroeconomic Underlying Factors of Unemployment in Pakistan

Muhammad Ahmad Mazher; Prof. Jauhari Dahalan

Abstract: Unemployment is one of the challenges facing today’s world. The impartial of the study was to examine the long-run and short-run relationships between unemployment and its macro-economic determinants comprising energy usage, FDI, GDP growth, inflation deflator, and population over 1970-2018. After using the Augmented Dickey-Fuller (ADF) tests through Schwarz Info Criterion (SIC), Akaike Info Criterion (AIC) and Phillips-Perron (PP) for unit-root, this study employed Auto-Regressive Distributed Lag (ARDL) bounds testing approach. The regression result proposes that under short-run and long-run energy usage, FDI and Population have together been domineering in amplification of the long-run unemployment rate. The significant and negative coefficient of error correction term indicates to the high speed of adjustment to achieve the long-run equilibrium. In conclusion, the study proposes the government should increase the level of aggregate supply, economic growth along with job formation, form an encouraging environment that induces much foreign direct investments (FDI) and control the population pressure, consolidate the existing entrepreneurship activity with new entrepreneurial entrants to create more employment and fascinate a huge pool of unemployed population.

[ FULL TEXT PDF 1-6 ] DOI: 10.30566/ijo-bs/2019.125

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