Effect of economic growth and inflation on unemployment: An empirical analysis in Senegal from 1991 to 2018

Abstract

Abstract. Nowadays, unemployment is a big issue for policymakers. The high rate of unemployment can lead to instability such as crime and poverty. For this reason, unemployment can be viewed as heartbreaking for the country’s economy. This paper mainly studies the relationship between Senegal’s unemployment rate, economic growth and the inflation rate for the period 1991-2018. In this study, the autoregressive distributed lag (ARDL) modeling approach ( Pesaran & Shin, 1999 ) and the bound test of cointegration were applied. Furthermore, the Augmented Dickey-Fuller Test (ADF) and Phillips Perron (PP) was applied to the test unit root or stationary issue. Finally, the Granger Causality Test also was conducted to check if it exists a unidirectional or bidirectional causality among variables. The findings show a negative long-run and short-run relationship between unemployment, growth, industry and age dependency ratio whereas it appears a positive relationship between unemployment and inflation in both periods. It is also indicated that there is no Granger causality relationship between unemployment, economic growth, and inflation. Whereas unemployment and economic growth have a Granger causality on the industry. Keywords. Unemployment rate, Inflation, Economic growth, ARDL, Granger Causality. JEL. F53, E31, J60.