Unemployment and Economic Growth: A Cross-Sectionally Autoregressive Distributed Lag (SC-ARDL) and Dynamic Common Correlated Effects (DCCE Panel) for North African Countries

Abstract

This paper is aimed at examining the relevance of the dynamics relationship between unemployment and economic growth in North African countries from 2006 to 2022. The study adopted Panel ARDL model and Dumitrescu-Hurlin panel Granger causality analysis that allows capturing slope heterogeneity among each member. The results obtained from the cointegration technique of (Pesaran & Shin, 1999) confirm that a long-term relationship exists between growth and unemployment rate. The purpose of this study is to investigate the relationship between economic growth and unemployment in North African countries for the period of 2006–2022 within panel data framework by applying cs-ARDL and common correlated effects in a dynamic panel (DCCE). In this paper this relationship has been examined in the context of Okun’s Law. Panel Unit Root with 2nd generation and Westerlund cointegration test were applied, respectively. The results show that the economic growth and unemployment series are stationary at first difference, unemployment was affected positively by economic growth, in other words 1% rise in GDP will decrease the unemployment rate by 0.05% because of Okun’s coefficient for North African countries and there is a co-integration between these important macroeconomic variables.

Keywords

• north african countries
• unemployment rate
• economic growth
• csardl
• dcee