The Determinants of Unemployment in Malaysia

Lim, Yeu Jen (2018) The Determinants of Unemployment in Malaysia. Final Year Project (Bachelor), Tunku Abdul Rahman University College.

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Abstract

This paper investigates the relationship between unemployment rate, inflation, Gross Domestic Product (GDP), exchange rate and population rate in Malaysia. This paper examines the relationship between unemployment rate, inflation, Gross Domestic Product (GDP), exchange rate and population rate in Malaysia from year 1985 to year 2015 which consists of 31 observations. This research employed several analysis tools such as Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) Unit Root Test, Lag-length selection, Bound Test Checking, ARDL, VAR Block Exogeneity Test and VAR estimates to evaluate the relationships. ADF Unit Root Test adopted to identify whether the data is stationary. Lag-length selections is utilized to determine appropriate lag length. Bound Test Checking and ARDL approach is used to examine whether there is long-run relationship among the variables. VAR Block Exogeneity Test treated as Granger Causality Test to investigate the casual relationship and to clarify the effects on unemployment rate in the future following inflation, Gross Domestic Product (GDP), exchange rate, and population rate granger of current year. VAR estimated is utilised to determine how much the changes of one variables to another variable. Diagnostic Checking such as Heteroskedasticity and Autocorrelation will be used to examines whether the model is free from heteroskedasticity and autocorrelation problems. Normality test such as Jarque-Bera test is utilized to examine whether the data from the model have normality distributed. The appropriate interpretation for the above models