The impact of unemployment on economic growth in Uganda (1994-2023)

Abstract

The purpose of this study was to investigate the impact of unemployment on economic growth in Uganda from 1994-2023.This study focused on three specific objectives which are to determine the trend of unemployment rates and real GDP from 1994-2023, to determine the long run relationship between unemployment rate and real GDP from 1994-2023 and to determine the short run relationship between unemployment rate and real GDP from 1994-2023.Time series data for Uganda for the period 1994-2023 was used for analysis in this study. The data was obtained from World Bank and International Labour Organisation (ILO) estimates. The results revealed that Uganda’s real GDP has been increasing since 1994 and the unemployment rates of Uganda have been unstable. The variables used were real GDP which was the dependent variable and unemployment rate which was the independent variable. The ADF and Phillip perron unit root test was used to establish the order of integration of the variables. The Johansen co￾integration test was used to determine if there is long run relationship between unemployment rate and real GDP and the results showed that there was no co-integration and there was no long run relationship between unemployment rate and real GDP. The vector auto-regression model was used to determine the short run relationship between unemployment and economic growth. However, the results revealed that there was no short run relationship between unemployment rate (unemployment) and real GDP (economic growth). Furthermore, the findings showed that the first lagged values of annual real gross product significantly caused the changes in the real gross domestic product at 95% confidence level and there was a positive relationship between the first lagged values of annual real gross product and real GDP. Additionally, the analysis revealed that the first lagged values of the unemployment rate significantly caused the changes in the unemployment rate at 95% confidence level and there is a positive relationship between the first lagged values of the unemployment rate and unemployment rate.