Examining how unemployment, inflation and their related aspects affected economic growth in Palestine: The period from 1991 to 2020

Abstract

This study aims to focus on identifying how unemployment and inflation and their related aspects affect Palestinian economic growth. The study employed the Autoregressive Distributed Lag (ARDL) model employing annual time series data for estimate and result analysis. The ARDL model was estimated in both long and short run as follows; on one hand, the results showed that there is a potential negative impact of aspects-related unemployment on economic growth in Palestine over the long-term. On the other hand, over the long term also, it can be noticed that there is a positive impact of aspects-related inflation on economic growth in the state of Palestine. In the short term, a significant negative effect of unemployment (UN) was discovered on economic growth, while there was no effect of inflation (INF), despite being positive. The error-correction model (ECM) has been adopted in this model, and the results revealed that the ECM co-efficient [ECM (−1)] was positive and equaled to (0.0183) and therefore was not significant. Based on the results obtained, the study recommended that there a need to stabilize inflation through effective price control mechanisms that can enhance macroeconomic conditions, increase investor confidence, stimulate economic growth, and work to create opportunities for the full use of human resources by stimulating self-employment to engage in entrepreneurial activities according to the qualifications of graduates. Finally, it equips population, especially youth, with relevant skills to increase productivity and reduce unemployment.

Keywords

• Inflation
• Economic development
• Unemployment and ARDL model