Causal Relationship between Unemployment and Economic Growth in Nigeria

Abstract

The researchers analysed the casual relationship between unemployment and economic growth in Nigeria from 1981 to 2020. The Johansen co-integration and error correction mechanism (ECM) methodology was used to test short-run and long-run impacts of unemployment on economic growth. Granger causality test was also carried out to test the causality between unemployment and economic growth. The empirical result showed that there is a long-run relationship between unemployment and economic growth in Nigeria. Unemployment rate had an inverse and significant relationship with Nigeria economic growth both on the short and long-runs. The Granger causality test results showed that there is a unidirectional causality running from unemployment to economic growth. The researchers, therefore, recommended that government and relevant agencies should formulate policies to encourage self employment and reduce cost of doing business in the country so as to achieve a high, rapid and sustained economic growth.