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    The impact of public education expenditures on graduate unemployment: Cointegration analysis to Ethiopia
    (İstanbul Ticaret Üniversitesi, 2021) Dachito, Amsalu; Alemu, Minyahil; Alemu, Berhanu
    Unemployment is amongst most pressing economic challenges the Ethiopian economy has long been experiencing. Though the country succeeded in targeting overall unemployment most recently, graduate unemployment continued trending at higher rates over the years. We examined the impact of government education spending on the rate of graduate unemployment in Ethiopia, using yearly series of data over the periods spanning from 1991to 2019. The results of Augmented Dickey Fuller test revealed difference stationarity for all series of interest; while the suggested order of integration was one. The results of Johnson’s cointegration test indicated the existence of long-run equilibrium relationships among the variables entered the test model. In determining the impacts of inflation rate (CPI), economic growth (RGDP) and public education spending on graduate unemployment, we employed Vector Error Correction Model as it enables us capture the short-run and long-run outputs instantaneously. According to VECM regression results, inflation rate and expenditure on education were found to have significant impact on the long-run growth rate of graduate unemployment. While the inflation rate contributed positively, government expenditure has negative influence on the rate of graduate unemployment towards validating the Keynesian theory of employment. Besides, the impacts of both variables were found to persist in the short-run. Both are estimated significant and consistent in sign in the short-run. However, economic growth was found to have a trivial role in explaining the rate of graduate unemployment in both the short-run and the long-run periods. Moreover, the results of VEC causality analysis revealed a significant unidirectional causality running from economic growth towards public funds available for financing education; but no causality was suggested in reverse. We recommend a drastic measure to advance the education sector through suitable investments in a manner that will help in skills development, productivity enhancement and entrepreneurship growth.
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    Unemployment and the macroeconomics of Ethiopia
    (İstanbul Ticaret Üniversitesi, 2020) Sisay ,Endashaw; Wassie, Yilkal; Alemu, Minyahil
    Unemployment has long been there for (especially) developing economies being the major development challenge. The cost of unemployment transmits in a couple of channels; of which the opportunity costs arising from lost production and the resultant social disorders are of immediate ledges. While appreciating them all, the government of Ethiopia (GoE) conveyed various schemes towards reducing unemployment to (at least the recommended) minimum rate. Despite developments in various efforts to that end, unemployment remained pronounceable policy challenge in Ethiopia. It, therefore, calls for enhanced intervention towards supporting the process of controlling unemployment in the country. The present study is principally aimed to identify those macroeconomic policy variables that are important in explaining the dynamics of unemployment in Ethiopia. We employed the annual time series data set for the period serially running from 1984 to 2018. The individual variables were all subjected to the augmented Dickey Fuller unit root tests and the mixed order of integration has been confirmed. As a result, the auto-regressive Distributed Lag model approach was employed for cointegration issues; and various possible cointegrating roots among the variables entered the unemployment model were suggested too. Our regression results reveal that, the population growth rate, economic growth rate, inflation rate, foreign direct investment, and the external debt variables are all important predictors of unemployment both in long and the short run periods. A positive impulse moves from inflation to (cyclical) unemployment in Ethiopia, whereby contrasting the Phillips hypothesis. Economic and social development policies need not be treated in isolation. Any successful monetary policy action in targeting the threshold inflation rate is supposed to be a crucial approach. Besides, enhancing productive and more labor-oriented investments serve the best long run solution to that end, too.