Relationship between unemployment and policy uncertainty in Nigeria: ARDL evidence from 1990 to 2020

Purpose - Apart from providing theoretical clarity, the present research aims to validate empirically that the EPU will be adversely affecting these key macroeconomic variables and that managing EPU matters for economic policymaking in Nigeria. Design/methodology/approach - A dynamic autoregressive distributed lag regression model is employed to analyse the relationship from 1990 to 2020. Based on the theory of multiplier effect, the analysis could examine the positive and negative changes in policy uncertainty, as well as the reliability in macroeconomic activities such as unemployment, infrastructure development and foreign direct investment inflows. Findings - The findings revealed EPU is cointegrated with the key economic variables in focus. Further, the negative impact of EPU on corporate investment in FDI and positive impact of EPU on unemployment confirm for both short and long-run. However, the impact of EPU on government investment in infrastructure development is found to be positive which does not confirm the expected hypothesis. Practical implications - Dynamic relationship between policy uncertainty and macroeconomic activities in Nigeria seems to exist. Taking risky decisions has impact and causing a high unemployment rate, poor infrastructural development and lower foreign direct investment inflows in the country. Originality/value - Policy uncertainty in Nigeria is determining. Despite that, very little research found that rising uncertainty issues may significantly affect unemployment, investment in infrastructure and foreign direct investment inflows adversely. Therefore, policy uncertainty is an open space for economic activities to thrive in Nigeria, especially unemployment. Peer review - The peer review history for this article is available at:https://publons.com/publon/10.1108/IJSE-08-2022-0555