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The effect of inflation and unemployment on economic growth: evidence on Sierra Leone

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  • JALLOH, TALATU
  • BAH, FATMATA BINTA

Abstract

The main purpose of this study is to investigate the effect of inflation and unemployment on economic growth in Sierra Leone. Using a quarterly time series data, the study adopted the Autoregressive Distributed Lag (ARDL) model for the purpose of estimation and result analysis. Through the ARDL Bounds test for cointegration, the study established the existence of a long-run relationship in the model, and as a result, both a long-run and short-run ARDL models were estimated. From the long-run results, it was revealed that the effect of Inflation (Inf) and unemployment (Unem) on economic growth in Sierra Leone was significantly negative.). For the short-run, an ARDL with lag structure of (2, 2, 0, 1, 2) was used. In this model, the ECT reinforced the existence of a long-run as it was found to be negative and statistically significant. Unlike Unem, the first lag of economic growth (RGDP (-1)), Inf and Inf (-1) were found to have an effect on economic growth in Sierra Leone in the short-run. Based on the findings, it recommended that credible inflation targeting policies must be pursued by monetary authorizes while the government should create opportunities through which the skills and capacity of the population can be fully enhanced.

Suggested Citation

  • Jalloh, Talatu & Bah, Fatmata Binta, 2023. "The effect of inflation and unemployment on economic growth: evidence on Sierra Leone," MPRA Paper 117666, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:117666
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    References listed on IDEAS

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    More about this item

    Keywords

    Economic growth; Inflation; Unemployment; ARDL;
    All these keywords.

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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