The Effect of Inflation and Private Investment on Open Unemployment in North Maluku (Partial Adjudication Model (PAM) Approach)

Nonce Hasan ,Muammil Sun'an

doi:10.7176/jesd/10-12-07

Abstract

The unemployment problem is very complex and an important issue. It can relate to several indicators. Economic indicators to affect the unemployment level include economic growth, inflation level, private investment and the wages. This study objective is to analyze the effect of private investment and inflation on unemployment level in North Maluku Province. The model is analyzed by stationarity test, cointegration approach, and partial adjustment model (PAM). The results showed that inflation level had a significant and positive effect on unemployment level in North Maluku Province. Private investment had a significant and negative effect on unemployment. Then all research variables (inflation, private investment, and unemployment) had a balance relationship in long run. Keywords : Inflation, Private Investment, Open Unemployment, Partial Adjustment Models. DOI : 10.7176/JESD/10-12-07 Publication date :June 30 th 2019

Highlights

Unemployment is defined as someone belong to workforce and actively looking for work at a certain wage level, but does not get the desired job
He showed a negative relationship between the wage level increase and unemployment level
Simultaneous Testing of Regression Coefficients (Test F) Simultaneous testing of regression coefficient examines the simultaneous effect of independent variables on dependent variable

Summary

Introduction

Unemployment is defined as someone belong to workforce and actively looking for work at a certain wage level, but does not get the desired job. The relationship between inflation and unemployment began to attract the economists attention in late 1950s, when AW Phillips published his article in Economical journal entitled The Relationship between Unemployment and Rate of Change of Money Wage Rate in United Kingdom published. He showed a negative relationship between the wage level increase and unemployment level (which is known as the Phillips curve). Phillips's research used data on wages change and unemployment in United Kingdom during the years 1861-1913 to illustrate how the relationship between inflation and unemployment level based on assumption that inflation was a reflection of an increase in aggregate demand. There is an increase in labor demand so that unemployment level decreases (Arnson, 2002)

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