Relationship between unemployment and policy uncertainty in Nigeria: ARDL evidence from 1990 to 2020
International Journal of Social Economics
ISSN: 0306-8293
Article publication date: 16 February 2023
Issue publication date: 17 May 2023
Abstract
Purpose
Apart from providing theoretical clarity, the present research aims to validate empirically that the EPU will be adversely affecting these key macroeconomic variables and that managing EPU matters for economic policymaking in Nigeria.
Design/methodology/approach
A dynamic autoregressive distributed lag regression model is employed to analyse the relationship from 1990 to 2020. Based on the theory of multiplier effect, the analysis could examine the positive and negative changes in policy uncertainty, as well as the reliability in macroeconomic activities such as unemployment, infrastructure development and foreign direct investment inflows.
Findings
The findings revealed EPU is cointegrated with the key economic variables in focus. Further, the negative impact of EPU on corporate investment in FDI and positive impact of EPU on unemployment confirm for both short and long-run. However, the impact of EPU on government investment in infrastructure development is found to be positive which does not confirm the expected hypothesis.
Practical implications
Dynamic relationship between policy uncertainty and macroeconomic activities in Nigeria seems to exist. Taking risky decisions has impact and causing a high unemployment rate, poor infrastructural development and lower foreign direct investment inflows in the country.
Originality/value
Policy uncertainty in Nigeria is determining. Despite that, very little research found that rising uncertainty issues may significantly affect unemployment, investment in infrastructure and foreign direct investment inflows adversely. Therefore, policy uncertainty is an open space for economic activities to thrive in Nigeria, especially unemployment.
Peer review
The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-08-2022-0555
Keywords
Acknowledgements
This paper is part of an ongoing Ph.D. (Economics) research currently undertaken by the first author at the School of Social Sciences, Universiti Sains Malaysia under the supervision of Associate Professor Dr. Nor Asmat Ismail in the Economics section of the School of Social Sciences, Universiti Sains Malaysia, 11800 Pulau Pinang Malaysia. This publication is intended to meet the university publication requirements for postgraduate research graduation. The authors would like to thank the thesis supervisor, the journal editors and the anonymous reviewers for their insightful comments that have helped to enhance the quality of this article in its present form.
Citation
Zaria, Y.B. and Tuyon, J. (2023), "Relationship between unemployment and policy uncertainty in Nigeria: ARDL evidence from 1990 to 2020", International Journal of Social Economics, Vol. 50 No. 6, pp. 800-820. https://doi.org/10.1108/IJSE-08-2022-0555
Publisher
:Emerald Publishing Limited
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