Journal of Current Research on Social Sciences (JoCReSS) - ISSN: 2547-9644

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Abstract


Short and Long-Run Macroeconomic Determinants of Unemployment in Selected Leading Emerging Markets

This paper aims to investigate; (i) the short and long-run determinants of unemployment, (ii) whether the Okun’s law works in reality, and (iii) the effects of external shocks to the unemployment rate in selected leading emerging markets (LEM’s) which include Brazil, Russia, China, S. Africa, Portugal, Ireland, Greece, Spain, Argentina, Chile, Korea, Malaysia, Philippines, Poland and Turkey, for the period of 2000-2016 by using quarterly data. Applying ARDL testing approach, the study finds that; (i) the short and the long-run determinants of unemployment are the changes in real GDP (RGDP), current account to GDP ratio (CAGDP), consumer price index (CPI), real effective exchange rate (RER), stock exchange prices of each country (SEP), interest rates (INTR), the Federal Funds Rate (FFR), S&P500 and Crude Oil Price Index (OILP). (ii) The Okun’s law holds for 8 out of 15 countries with correct sign. For two (2) countries the relationship is positive indicating “jobless growth” and for five (5) countries the Okun’s law relationship is not found in the long-run. (iii) The external shocks have effect on unemployment rate; the oil price shocks affect the unemployment 13 out of 15 countries and the sign of the relationship depends on whether the country is oil/energy dependent or producer of oil. Also, the results reveal that the shocks originated from the USA have a huge impact on unemployment. The long-run results about the determinants of unemployment changes from country to country and the difference mainly depends on (i) whether the country is oil dependent or producer of oil, or (ii) trade dependent on center countries such as the USA. The empirical study results imply that in order to improve the welfare of the households via improved employment, the emerging economies have improve their economic activities and try to reduce the negative effects of the external shocks.



Keywords
Unemployment, Okun’s law, International Business Cycles, External Shocks, ARDL



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