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Determinants of unemployment rate in an open economy: Malaysian evidence

Author

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  • Ghafar, Nurul
  • Masih, Mansur

Abstract

The focus of this paper is on the determinants of unemployment rate and economic variables in an open economy. Malaysia is taken as a case study. The standard time series techniques such as, VECM and VDC are used for the analysis. The results based mostly on variance decompositions (VDC) tend to indicate that in an open economy like Malaysia, the unemployment rate appears to be an endogenous (i.e., dependent) variable driven mostly by the inflation rate followed by private consumption and population variables. The results are plausible and intuitive and have strong policy implications for the developing countries like Malaysia.

Suggested Citation

  • Ghafar, Nurul & Masih, Mansur, 2016. "Determinants of unemployment rate in an open economy: Malaysian evidence," MPRA Paper 109916, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:109916
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    References listed on IDEAS

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    5. Nickell, Stephen, 1998. "Unemployment: Questions and Some Answers," Economic Journal, Royal Economic Society, vol. 108(448), pages 802-816, May.
    6. Friedman, Milton, 1977. "Nobel Lecture: Inflation and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 451-472, June.
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    More about this item

    Keywords

    unemployment rate; macroeconomic variables; open economy; VECM; VDC; Malaysia;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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