Dynamic relationship between external debt and unemployment in Sub-Saharan Africa

Abstract

The struggle to reduce cyclical unemployment by Sub-Saharan African countries is as a result of their inability to integrate fiscal policies into macroeconomic goals and establish independent, well-resourced bodies to manage borrowed funds. We examine the dynamic relationship between external debt and unemployment in Sub-Saharan Africa using data from 25 countries. This study demonstrates a direct relationship between foreign debt and unemployment, which is attributed to the erroneous application of discretionary fiscal policy decisions and the inefficient use of borrowed funds. Evidence also suggests a nonlinear relationship between external debt and unemployment across the countries studied.

Keywords

• external debt
• investments
• unemployment
• job opportunity
• fiscal policy discipline