Analysis Of Impact Of Inflation And Economic Growth On Unemployment In Ethiopia

The study examined the impact of inflation on unemployment Ethiopia; for the period 1991-2018. Cointegration test, Error Correction Model (ECM) technique and Granger causality test were employed in the analysis. The variables utilized in the investigation include inflation rate, external debt and unemployment rate. Stationarity test was conducted and the results indicated that all the variables except Inflation were stationary at first difference; however, inflation became stationary at level. The cointegration test result revealed that long run relationship exists among the variables under study. More so, ECM result showed that inflation has negative and significant impact on unemployment. Finally, the Granger causality results indicated unidirectional relationship between unemployment and inflation with causality running from inflation to Unemployment. Using this approach, the researcher find evidence of a long-run relationship between unemployment rate and inflation. Based on the findings above, the study therefore, recommends the need for the government to put in place policies that control inflation toward sunemploymentreduction.