Exploring the Influence of the Macroeconomic Determinants of Unemployment in the East African Community

Abstract

Unemployment as a macroeconomic indicator provides valuable insights into the economic health and general macroeconomic performance of an economy. This study is based on the Okun’s law and Philips curve theoretical frameworks to provide a regional perspective of the relationship between macroeconomic variables and unemployment in the East Africa Community (EAC). In analysing the relationship, the Hausman test is employed and it favours the use of the Random Effects model. The panel data estimation techniques are used on annual aggregate EAC data over the period 2000 to 2018. The results show that Foreign Direct Investment (FDI), population and labour productivity are the significant macroeconomic variables that can be used to analyse unemployment in EAC. Population and labour productivity are found to have a positive relationship while FDI has a negative relationship with unemployment. This study, therefore, advocates for favourable macroeconomic environment that is conducive for employment creation in the EAC region.