The Effect of Economic Factors as Determinants of Unemployment in SubSaharan Africa
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Abstract
This study examines the relationship between economic factors and unemployment in Sub-Saharan Africa (SSA), considering gross domestic product (GDP), inflation, interest rates, exchange rates and trade openness. It uses an ex post facto design and annual data from the World Development Indicators for 24 countries over the period 1996–2024. A panel autoregressive distributed lag model is estimated using mean group, pooled mean group (PMG) and dynamic fixed effects estimators. The reported Hausman comparisons favour PMG. In the PMG long-run results, log GDP is negatively associated with unemployment, while inflation, trade openness, the log exchange rate and the interest rate have positive coefficients. The reported error correction coefficient is −0.292, indicating adjustment towards long-run equilibrium. The findings highlight the importance of considering output and monetary and external sector conditions together when examining unemployment in SSA. Policy priorities include macroeconomic stability, productive investment, improved access to finance and structural measures that increase the employment content of growth. The estimated relationships inform these priorities without establishing a specific inflation target or optimal interest rate.
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