Abstract
This paper examines how government expenditure and money supply affect unemployment in Namibia. It employs the ARDL and ECM estimation techniques to establish the underlying relationship for the period 1980-2018. The results support the hypothesis that government expenditure and money supply can be used to contain unemployment. Additionally, an evidence of both long and short-run causality from government expenditure and money supply to unemployment is found. Practical policy implications indicate that in order to effectively combat unemployment problem in Namibia, the study recommends that there is a need for policy makers to ensure that the goal of employment creation is mainstreamed in all relevant fiscal and monetary policies responses in the country. Moreover, there is also a need to identify and propose policies that can help to do away with the lack of effective policy interventions
Highlights
Economists still argue on the basic dilemma, whether expansionary government expenditure or money supply can enhance economic growth that translates into a low level of unemployment (Attamah, Anthony & Ukpere, 2015)
This result is consistent Sunde (2015) who found monetary policy in Namibia to not have an effect on unemployment in the long run
Error Correction Model (ECM) Results: The error correction estimates in Table 5 indicates that there exists an inverse relationship between government expenditure and money supply
Summary
Economists still argue on the basic dilemma, whether expansionary government expenditure or money supply can enhance economic growth that translates into a low level of unemployment (Attamah, Anthony & Ukpere, 2015). A fiscal/monetary expansion in terms of government spending/money supply is presumed to play a role in the mitigation of unemployment as well as stabilising the economy. If the tax incentives are used to enhance the investment climate and thereby increase employment. In this way, it would result in a better targeted fiscal response to address policy issues. Emerging countries use monetary policy variables in terms of money supply to target employment. The basis is that when interest is low, companies would borrow money to expand which leads to job creation
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