Revue internationale des sciences économiques et de gestion

Econometric Analysis of the Impact of Economic Growth and Inflation on Unemployment rate in Tanzania

Abstract

Moga Tano Jilenga*, Seleman Abas Seleman

Studies on the relationship between unemployment and economic growth both in developed and developing countries is still debatable. This study investigates the impact of economic growth and inflation on unemployment rate in Tanzania. We use time-series data for the period spanning from 1991 to 2020 and the Dynamic Ordinary Least Square (DOLS) technique to analyse the relationship of unemployment and economic growth for the case of Tanzania. The DOLS technique is used due to its superiority in estimating the long-run and short-run coefficients of co-integrated series. The results from the empirical analysis found that there is significant negative long-run relationship between economic growth and inflation with respect to unemployment rate in Tanzania. Thus, both the real Gross Domestic Product and inflation rate are statistically significant in influencing unemployment rate in the long-run. The study recommends that; first, in order to reduce unemployment rate, industrialization is highly encouraged if the country is to promote economic growth. Secondly, monetary and fiscal policies should be used in controlling the flow of money in the economy which results in the control of inflationary negative outcomes.