Factor Input Prices and Unemployment in Uganda
Keywords:
Unemployment, Input prices, Auto Regressive Distributive Lag (ARDL)
Abstract
Examining the impact of input costs on unemployment in Uganda, this study employed an ARDL model based on the Efficiency Wage Theory. Analyzing annual data from 1987 to 2019 and controlling for economic size and currency value, the research found that lending interest rates, real exchange rates, and GDP have a short-term negative impact on unemployment, suggesting an initial rise. However, the study highlights a positive long-run relationship between these factors and unemployment, indicating their potential to contribute to lower unemployment over time. Interestingly, no significant short-run or long-run effect of global crude oil prices on Uganda's unemployment was identified. These findings suggest that while central bank policies promoting lower interest rates can encourage short-term investment and potentially lower unemployment, long-term economic growth is also crucial. Furthermore, the lack of impact from oil prices underscores the need for Ugandan policymakers to diversify the economy beyond oil dependence for sustainable unemployment reduction.
Downloads
Download data is not yet available.
References
Adeosun, O. A., Olayeni, R. O., Tabash, M. I., & Anagreh, S. (2023). The dynamics of oil prices, uncertainty measures and unemployment: a time and frequency approach. China Finance Review International, 13(4), 682-713.
Almutairi, N. (2020). The effects of oil price shocks on the macroeconomy: Economic growth and unemployment in Saudi Arabia. OPEC Energy Review, 44(2), 181-204.
Azzollini, L. (2023). Scar effects of unemployment on generalized social trust: The joint impact of individual and contextual unemployment across Europe. Social Science Research, 109, 102787.
Bakhshi, Z., & Ebrahimi, M. (2016). The effect of real exchange rate on unemployment. Marketing and Branding Research, 3, 4-13.
Batrancea, L., Rathnaswamy, M. K., & Batrancea, I. (2022). A panel data analysis on determinants of economic growth in seven non-BCBS Countries. Journal of the Knowledge Economy, 13(2), 1651-1665.
Beckmann, J., Czudaj, R. L., & Arora, V. (2020). The relationship between oil prices and exchange rates: Revisiting theory and evidence. Energy Economics, 88, 104772.
Bošnjak, M. (2021). Real effective exchange rate and unemployment across post-transition Europe: Evidence from wavelet coherence analysis. Ekonomski vjesnik: Review of Contemporary Entrepreneurship, Business, and Economic Issues, 34(2), 249-264.
Bošnjak, M., Kordi?, G., & Novak, I. (2021). Real effective exchange rate and industrial productivity in Croatia: Wavelet coherence analysis. Southeast European Journal of Economics and Business, 16(1), 30-37.
Cacciatore, M., & Ghironi, F. (2021). Trade, unemployment, and monetary policy. Journal of International Economics, 132, 103488.
Cahyadin, M., & Ratwianingsih, L. (2020). External debt, exchange rate, and unemployment in selected ASEAN countries. Jurnal Ekonomi & Studi Pembangunan, 21(1), 16-36.
Chan, Y. T., & Dong, Y. (2022). How does oil price volatility affect unemployment rates? A dynamic stochastic general equilibrium model. Economic Modelling, 114, 105935.
Daniel, S. U., Israel, V. C., Chidubem, C. B., & Quansah, J. (2021). Relationship between inflation and unemployment: Testing Philips curve hypotheses and investigating the causes of inflation and unemployment in Nigeria. Traektoriâ Nauki= Path of Science, 7(9), 1013-1027.
Darvas, Z. M. (2021). Timely measurement of real effective exchange rates (No. 15/2021). Bruegel working paper.
Dimitriou, D., Tsioutsios, A., Simos, T., & Kenourgios, D. (2024). Do Interest Rates Really Relate to Economic Growth? The Case of Greece.
Dynan, K., & Sheiner, L. (2018). GDP as a measure of economic well-being (Vol. 43, No. 1, pp. 1-52). Hutchins Center Working Paper.
Ehikioya, B., Omankhanlen, A., Babajide, A., Osuma, G., & Omodero, C. O. (2020). Oil price fluctuations and exchange rate in selected Sub-Saharan Africa countries: A vector error correction model approach. International Journal of Energy Economics and Policy, 10(6), 242-249.
Elder, J., & Payne, J. E. (2023). Racial and ethnic disparities in unemployment and oil price uncertainty. Energy Economics, 119, 106556.
Feng, Y., Lagakos, D., & Rauch, J. E. (2024). Unemployment and development. The Economic Journal, 134(658), 614-647.
Ge, Y., & Tang, K. (2020). Commodity prices and GDP growth. International Review of Financial Analysis, 71, 101512.
Ghosh, S. (2021). COVID-19, stock market, exchange rate, oil prices, unemployment, inflation, geopolitical risk nexus, the case of the BRICS nations: Evidence quantile regression. In Impact of Global Issues on International Trade (pp. 85-105). IGI Global.
Gil-Alana, L. A., & Monge, M. (2020). Crude oil prices and COVID-19: Persistence of the shock. Energy Research Letters, 1(1).
Gupta, R., Pierdzioch, C., & Salisu, A. A. (2022). Oil-price uncertainty and the UK unemployment rate: A forecasting experiment with random forests using 150 years of data. Resources Policy, 77, 102662.
Hayat, M. A., Ghulam, H., Batool, M., Naeem, M. Z., Ejaz, A., Spulbar, C., & Birau, R. (2021). Investigating the causal linkages among inflation, interest rate, and economic growth in Pakistan under the influence of the COVID-19 pandemic: A wavelet transformation approach. Journal of Risk and Financial Management, 14(6), 277.
Hegeland, E., & Taalbi, J. (2019). What determines unemployment in the long run? Band spectrum regression on ten countries (No. 203). Lund University, Department of Economic History.
Hofmann, B., Lombardi, M. J., Mojon, B., & Orphanides, A. (2021). Fiscal and monetary policy interactions in a low-interest rate world.
Iddrisu, A. A., & Alagidede, I. P. (2020). Revisiting interest rate and lending channels of monetary policy transmission in the light of theoretical prescriptions. Central Bank Review, 20(4), 183-192.
Ijirshar, V. U., Okpe, I. J., & Andohol, J. T. (2022). Impact of exchange rate on trade flow in Nigeria. CBN Journal of Applied Statistics, 13(2), 202-208.
International Labour Organization (ILO). (2024). Unemployment, total (% of total labor force) (modeled ILO estimate). Retrieved from https://data.worldbank.org/indicator/SL.UEM.TOTL.ZS
Jaffri, A. A., Amreen, H., Asjed, R., & Sana, M. (2017). Impact of Real Effective Exchange Rate on Unemployment in Pakistan: An Empirical Investigation. Managerial Sciences, 11.
James, M., Eria, H., & Ibrahim, M. (2023). Sectoral Growth Patterns and Unemployment in Uganda. East African Journal of Business and Economics, 6(1), 59-78.
Kassouri, Y., & Alt?nta?, H. (2020). Commodity terms of trade shocks and real effective exchange rate dynamics in Africa's commodity-exporting countries. Resources Policy, 68, 101801.
Kaufmann, D. (2020). Does government-backed lending prevent unemployment? An assessment of the Swiss COVID-19 lending program (No. 20-10). IRENE working paper.
Kiley, M. T. (2022). Unemployment risk. Journal of Money, Credit and Banking, 54(5), 1407-1424.
Kocaarslan, B., Soytas, M. A., & Soytas, U. (2020). The asymmetric impact of oil prices, interest rates and oil price uncertainty on unemployment in the US. Energy Economics, 86, 104625.
Kocaaslan, O. K. (2019). Oil price uncertainty and unemployment. Energy Economics, 81, 577-583.
Mahdi, B. E. (2016). Inflation and Gross Domestic Product (GDP) in Uganda (1984-2014) (Doctoral dissertation, Kampala International University, College of Economics and Management Sciences.).
Mansouri, S. S., Gachpazan, M., & Ahmady, N. (2021). Improved Predictor Corrector Scheme for Solving Vasicek Interest Rate Model in Uncertain Environment. In Progress in Intelligent Decision Science: Proceeding of IDS 2020 (pp. 873-888). Springer International Publishing.
Mathenge, S., & Muturi, W. (2021). Determinants of Unemployment in East African Community Countries. Account and Financial Management Journal, 6(10).
Molyneux, P., Reghezza, A., Thornton, J., & Xie, R. (2020). Did negative interest rates improve bank lending? Journal of Financial Services Research, 57, 51-68.
Nusair, S. A. (2020). The asymmetric effects of oil price changes on unemployment: evidence from Canada and the US. The Journal of Economic Asymmetries, 21, e00153.
Obinna, O. (2020). Impact of interest rate deregulation on investment growth in Nigeria. International Journal of Economics and Financial Issues, 10(2), 170.
Ogede, S. J., George, E. O., & Adekunle, I. A. (2020). Exploring the inflationary effect of oil price volatility in Africa’s oil exporting countries. Facta Universitatis, Series: Economics and Organization, 113-125.
Panigrahi, S., Azizan, N., Sorooshian, S., & Thoudam, P. (2020). Effects of Inflation, Interest, and Unemployment Rates on Economic Growth: Evidence from ASEAN Countries. ABAC Journal, 40(2).
Raifu, I. A., Aminu, A., & Folawewo, A. O. (2020). Investigating the relationship between changes in oil prices and unemployment rate in Nigeria: linear and nonlinear autoregressive distributed lag approaches. Future Business Journal, 6, 1-18.
Ridhwan, M. M., Ismail, A., & Nijkamp, P. (2024). The real exchange rate and economic growth: A meta-analysis. Journal of Economic Studies, 51(2), 287-318.
Senzangakhona, P., & Choga, I. (2015). Crude oil prices and unemployment in South Africa: 1990–2010. Mediterranean Journal of Social Sciences, 6(2), 407-414.
Shen, Q., Chang, B., Ma, R., & Tao, X. (2021). HOW DOES INTEREST RATE LIBERALISATION INFLUENCE THE PROFITS OF COMMERCIAL BANKS? EVIDENCE FROM CHINA. Transformations in Business & Economics, 20(3).
Uddin, I., & Rahman, K. U. (2023). Impact of corruption, unemployment and inflation on economic growth evidence from developing countries. Quality & Quantity, 57(3), 2759-2779.
Umoru, D., Effiong, S. E., Ugbaka, M. A., Iyaji, D., Oyegun, G., Ofie, F. E., ... & Hussaini, R. (2023). Threshold of currency devaluation and oil price movements that stimulate industrial production. Corporate Governance and Organizational Behavior Review, 7(1), 121-139.
Usman, O., & Elsalih, O. M. (2018). Testing the effects of real exchange rate pass-through to unemployment in Brazil. Economies, 6(3), 49.
Wang, K. H., Liu, L., Li, X., & Oana-Ramona, L. (2022). Do oil price shocks drive unemployment? Evidence from Russia and Canada. Energy, 253, 124107.
World Bank. (2023). Africa's Pulse, No. 28, October 2023: Delivering Growth to People through Better Jobs.
Zahra, A., Nasir, N., Rahman, S. U., & Idress, S. (2023). Impact of Exchange Rate, and Foreign Direct Investment on External Debt: Evidence from Pakistan Using ARDL Cointegration Approach. IRASD Journal of Economics, 5(1), 52-62.
Zhao, J., Cui, L., Liu, W., & Zhang, Q. (2023). Extreme risk spillover effects of international oil prices on the Chinese stock market: A GARCH-EVT-Copula-CoVaR approach. Resources Policy, 86, 1041-42.
Almutairi, N. (2020). The effects of oil price shocks on the macroeconomy: Economic growth and unemployment in Saudi Arabia. OPEC Energy Review, 44(2), 181-204.
Azzollini, L. (2023). Scar effects of unemployment on generalized social trust: The joint impact of individual and contextual unemployment across Europe. Social Science Research, 109, 102787.
Bakhshi, Z., & Ebrahimi, M. (2016). The effect of real exchange rate on unemployment. Marketing and Branding Research, 3, 4-13.
Batrancea, L., Rathnaswamy, M. K., & Batrancea, I. (2022). A panel data analysis on determinants of economic growth in seven non-BCBS Countries. Journal of the Knowledge Economy, 13(2), 1651-1665.
Beckmann, J., Czudaj, R. L., & Arora, V. (2020). The relationship between oil prices and exchange rates: Revisiting theory and evidence. Energy Economics, 88, 104772.
Bošnjak, M. (2021). Real effective exchange rate and unemployment across post-transition Europe: Evidence from wavelet coherence analysis. Ekonomski vjesnik: Review of Contemporary Entrepreneurship, Business, and Economic Issues, 34(2), 249-264.
Bošnjak, M., Kordi?, G., & Novak, I. (2021). Real effective exchange rate and industrial productivity in Croatia: Wavelet coherence analysis. Southeast European Journal of Economics and Business, 16(1), 30-37.
Cacciatore, M., & Ghironi, F. (2021). Trade, unemployment, and monetary policy. Journal of International Economics, 132, 103488.
Cahyadin, M., & Ratwianingsih, L. (2020). External debt, exchange rate, and unemployment in selected ASEAN countries. Jurnal Ekonomi & Studi Pembangunan, 21(1), 16-36.
Chan, Y. T., & Dong, Y. (2022). How does oil price volatility affect unemployment rates? A dynamic stochastic general equilibrium model. Economic Modelling, 114, 105935.
Daniel, S. U., Israel, V. C., Chidubem, C. B., & Quansah, J. (2021). Relationship between inflation and unemployment: Testing Philips curve hypotheses and investigating the causes of inflation and unemployment in Nigeria. Traektoriâ Nauki= Path of Science, 7(9), 1013-1027.
Darvas, Z. M. (2021). Timely measurement of real effective exchange rates (No. 15/2021). Bruegel working paper.
Dimitriou, D., Tsioutsios, A., Simos, T., & Kenourgios, D. (2024). Do Interest Rates Really Relate to Economic Growth? The Case of Greece.
Dynan, K., & Sheiner, L. (2018). GDP as a measure of economic well-being (Vol. 43, No. 1, pp. 1-52). Hutchins Center Working Paper.
Ehikioya, B., Omankhanlen, A., Babajide, A., Osuma, G., & Omodero, C. O. (2020). Oil price fluctuations and exchange rate in selected Sub-Saharan Africa countries: A vector error correction model approach. International Journal of Energy Economics and Policy, 10(6), 242-249.
Elder, J., & Payne, J. E. (2023). Racial and ethnic disparities in unemployment and oil price uncertainty. Energy Economics, 119, 106556.
Feng, Y., Lagakos, D., & Rauch, J. E. (2024). Unemployment and development. The Economic Journal, 134(658), 614-647.
Ge, Y., & Tang, K. (2020). Commodity prices and GDP growth. International Review of Financial Analysis, 71, 101512.
Ghosh, S. (2021). COVID-19, stock market, exchange rate, oil prices, unemployment, inflation, geopolitical risk nexus, the case of the BRICS nations: Evidence quantile regression. In Impact of Global Issues on International Trade (pp. 85-105). IGI Global.
Gil-Alana, L. A., & Monge, M. (2020). Crude oil prices and COVID-19: Persistence of the shock. Energy Research Letters, 1(1).
Gupta, R., Pierdzioch, C., & Salisu, A. A. (2022). Oil-price uncertainty and the UK unemployment rate: A forecasting experiment with random forests using 150 years of data. Resources Policy, 77, 102662.
Hayat, M. A., Ghulam, H., Batool, M., Naeem, M. Z., Ejaz, A., Spulbar, C., & Birau, R. (2021). Investigating the causal linkages among inflation, interest rate, and economic growth in Pakistan under the influence of the COVID-19 pandemic: A wavelet transformation approach. Journal of Risk and Financial Management, 14(6), 277.
Hegeland, E., & Taalbi, J. (2019). What determines unemployment in the long run? Band spectrum regression on ten countries (No. 203). Lund University, Department of Economic History.
Hofmann, B., Lombardi, M. J., Mojon, B., & Orphanides, A. (2021). Fiscal and monetary policy interactions in a low-interest rate world.
Iddrisu, A. A., & Alagidede, I. P. (2020). Revisiting interest rate and lending channels of monetary policy transmission in the light of theoretical prescriptions. Central Bank Review, 20(4), 183-192.
Ijirshar, V. U., Okpe, I. J., & Andohol, J. T. (2022). Impact of exchange rate on trade flow in Nigeria. CBN Journal of Applied Statistics, 13(2), 202-208.
International Labour Organization (ILO). (2024). Unemployment, total (% of total labor force) (modeled ILO estimate). Retrieved from https://data.worldbank.org/indicator/SL.UEM.TOTL.ZS
Jaffri, A. A., Amreen, H., Asjed, R., & Sana, M. (2017). Impact of Real Effective Exchange Rate on Unemployment in Pakistan: An Empirical Investigation. Managerial Sciences, 11.
James, M., Eria, H., & Ibrahim, M. (2023). Sectoral Growth Patterns and Unemployment in Uganda. East African Journal of Business and Economics, 6(1), 59-78.
Kassouri, Y., & Alt?nta?, H. (2020). Commodity terms of trade shocks and real effective exchange rate dynamics in Africa's commodity-exporting countries. Resources Policy, 68, 101801.
Kaufmann, D. (2020). Does government-backed lending prevent unemployment? An assessment of the Swiss COVID-19 lending program (No. 20-10). IRENE working paper.
Kiley, M. T. (2022). Unemployment risk. Journal of Money, Credit and Banking, 54(5), 1407-1424.
Kocaarslan, B., Soytas, M. A., & Soytas, U. (2020). The asymmetric impact of oil prices, interest rates and oil price uncertainty on unemployment in the US. Energy Economics, 86, 104625.
Kocaaslan, O. K. (2019). Oil price uncertainty and unemployment. Energy Economics, 81, 577-583.
Mahdi, B. E. (2016). Inflation and Gross Domestic Product (GDP) in Uganda (1984-2014) (Doctoral dissertation, Kampala International University, College of Economics and Management Sciences.).
Mansouri, S. S., Gachpazan, M., & Ahmady, N. (2021). Improved Predictor Corrector Scheme for Solving Vasicek Interest Rate Model in Uncertain Environment. In Progress in Intelligent Decision Science: Proceeding of IDS 2020 (pp. 873-888). Springer International Publishing.
Mathenge, S., & Muturi, W. (2021). Determinants of Unemployment in East African Community Countries. Account and Financial Management Journal, 6(10).
Molyneux, P., Reghezza, A., Thornton, J., & Xie, R. (2020). Did negative interest rates improve bank lending? Journal of Financial Services Research, 57, 51-68.
Nusair, S. A. (2020). The asymmetric effects of oil price changes on unemployment: evidence from Canada and the US. The Journal of Economic Asymmetries, 21, e00153.
Obinna, O. (2020). Impact of interest rate deregulation on investment growth in Nigeria. International Journal of Economics and Financial Issues, 10(2), 170.
Ogede, S. J., George, E. O., & Adekunle, I. A. (2020). Exploring the inflationary effect of oil price volatility in Africa’s oil exporting countries. Facta Universitatis, Series: Economics and Organization, 113-125.
Panigrahi, S., Azizan, N., Sorooshian, S., & Thoudam, P. (2020). Effects of Inflation, Interest, and Unemployment Rates on Economic Growth: Evidence from ASEAN Countries. ABAC Journal, 40(2).
Raifu, I. A., Aminu, A., & Folawewo, A. O. (2020). Investigating the relationship between changes in oil prices and unemployment rate in Nigeria: linear and nonlinear autoregressive distributed lag approaches. Future Business Journal, 6, 1-18.
Ridhwan, M. M., Ismail, A., & Nijkamp, P. (2024). The real exchange rate and economic growth: A meta-analysis. Journal of Economic Studies, 51(2), 287-318.
Senzangakhona, P., & Choga, I. (2015). Crude oil prices and unemployment in South Africa: 1990–2010. Mediterranean Journal of Social Sciences, 6(2), 407-414.
Shen, Q., Chang, B., Ma, R., & Tao, X. (2021). HOW DOES INTEREST RATE LIBERALISATION INFLUENCE THE PROFITS OF COMMERCIAL BANKS? EVIDENCE FROM CHINA. Transformations in Business & Economics, 20(3).
Uddin, I., & Rahman, K. U. (2023). Impact of corruption, unemployment and inflation on economic growth evidence from developing countries. Quality & Quantity, 57(3), 2759-2779.
Umoru, D., Effiong, S. E., Ugbaka, M. A., Iyaji, D., Oyegun, G., Ofie, F. E., ... & Hussaini, R. (2023). Threshold of currency devaluation and oil price movements that stimulate industrial production. Corporate Governance and Organizational Behavior Review, 7(1), 121-139.
Usman, O., & Elsalih, O. M. (2018). Testing the effects of real exchange rate pass-through to unemployment in Brazil. Economies, 6(3), 49.
Wang, K. H., Liu, L., Li, X., & Oana-Ramona, L. (2022). Do oil price shocks drive unemployment? Evidence from Russia and Canada. Energy, 253, 124107.
World Bank. (2023). Africa's Pulse, No. 28, October 2023: Delivering Growth to People through Better Jobs.
Zahra, A., Nasir, N., Rahman, S. U., & Idress, S. (2023). Impact of Exchange Rate, and Foreign Direct Investment on External Debt: Evidence from Pakistan Using ARDL Cointegration Approach. IRASD Journal of Economics, 5(1), 52-62.
Zhao, J., Cui, L., Liu, W., & Zhang, Q. (2023). Extreme risk spillover effects of international oil prices on the Chinese stock market: A GARCH-EVT-Copula-CoVaR approach. Resources Policy, 86, 1041-42.
Published
2024-04-07
How to Cite
Musiita, B., Kijjambu, F. N., & Katarangi, A. K. (2024). Factor Input Prices and Unemployment in Uganda. Journal of Economics and Behavioral Studies, 16(1(J), 52-66. https://doi.org/10.22610/jebs.v16i1(J).3711
Issue
Section
Research Paper
Copyright (c) 2024 Benjamin Musiita, Frederick Nsambu Kijjambu, Asaph Kaburura Katarangi
This work is licensed under a Creative Commons Attribution 4.0 International License.
Author (s) should affirm that the material has not been published previously. It has not been submitted and it is not under consideration by any other journal. At the same time author (s) need to execute a publication permission agreement to assume the responsibility of the submitted content and any omissions and errors therein. After submission of a revised paper in the light of suggestions of the reviewers, editorial team edits and formats manuscripts to bring uniformity and standardization in published material.
This work will be licensed under Creative Commons Attribution 4.0 International (CC BY 4.0) and under condition of the license, users are free to read, copy, remix, transform, redistribute, download, print, search or link to the full texts of articles and even build upon their work as long as they credit the author for the original work. Moreover, as per journal policy author (s) hold and retain copyrights without any restrictions.
