An Understanding of How GDP, Unemployment and Inflation Interact and Change across Time and Frequency

Shiferaw, Yegnanew A. (2023) An Understanding of How GDP, Unemployment and Inflation Interact and Change across Time and Frequency. Economies, 11 (5). p. 131. ISSN 2227-7099

[thumbnail of economies-11-00131.pdf] Text
economies-11-00131.pdf - Published Version

Download (455kB)


The main aim of this paper is to examine the dynamic relationship between the three pillars of the economy: unemployment, inflation, and GDP in Ethiopia using the cross-wavelet transform (XWT) analysis, the multivariate Student-t generalized autoregressive score (GAS) model, and the autoregressive distributed lag (ARDL) model. The dynamics between the three indicators were also investigated using the Toda–Yamamoto (TY) causality test. The empirical findings from the XWT method suggest a relationship between unemployment, inflation, and GDP, though the relationship varies over time and frequency. The estimation results from the multivariate Student-t GAS model show that the correlation between unemployment (overall, male, female, and youth) and inflation is highly significant, indicating that the correlation is dynamic. A dynamic relationship exists between GDP and unemployment, except for females and young people. The ARDL approach’s findings showed that unemployment significantly negatively impacted GDP. However, it was found that inflation significantly increased GDP. The general conclusion drawn from this study’s findings is that unemployment significantly affects GDP and inflation. Therefore, the government should aggressively implement policies to reduce unemployment, especially youth unemployment. Additionally, the administration must rehabilitate the country’s badly damaged economy and formalize a lasting cessation of hostilities between the federal government and the Tigray People’s Liberation Front (TPLF).

Item Type: Article
Subjects: Eprints STM archive > Multidisciplinary
Depositing User: Unnamed user with email admin@eprints.stmarchive
Date Deposited: 17 Jun 2023 11:12
Last Modified: 02 Nov 2023 06:16

Actions (login required)

View Item
View Item