Determinants of Unemployment in Malaysia

Lim, Qian Ying (2023) Determinants of Unemployment in Malaysia. Final Year Project (Bachelor), Tunku Abdul Rahman University of Management and Technology.

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Abstract

Unemployment rate is one of the most important economic indicators that would affect the country economic. A rising unemployment rate is a matter to be concern as it will put the country performance into danger. Hence, investigation of unemployment is important for a country as it will help to prevent many negative impacts from happening to do country. This paper focus on the investigation of the determinates of unemployment. The paper examines the long run and short run relationship between the unemployment rate and the inflation rate, gross domestic product, foreign direct investment and population. The annual time series data from 1982 to 2022 is used in the study. The dependent variable in the study is shown to be the unemployment rate while the independent variables are inflation rate, gross domestic product, foreign direct investment and population. In the study, the ARDL test is used to show the long run and short run relationship between the variables. Besides, the study also utilizes Unit Root test to test whether the data is stationary or non-stationary. Then it proceeds with the Granger Causality test which is used to indicate the causality relationship between variables. The estimated result concluded that only the variable inflation rate has a long run and short run relationship. For the variable population it does not have short run and long run relationship while the remaining variables only have relationship in the short run. Lastly, the research also mentions the limitations and recommended policy implications to further improve the study.