International Journal of Economics and Business Administration
Articles Information
International Journal of Economics and Business Administration, Vol.6, No.1, Mar. 2020, Pub. Date: Feb. 20, 2020
Econometric Assessment of Relationship Between Trade Openness and Unemployment in Africa: The Case Study of Democratic Republic of Congo
Pages: 23-29 Views: 145 Downloads: 116
Authors
[01] David Masamba Famode, Faculty of Economic Sciences, University of Mbandaka, Mbandaka, Democratic Republic of the Congo; Higher Pedagogical Institute of Yakoma, Yakoma, Nord-Ubangi, Democratic Republic of the Congo.
[02] Patrick Matata Makalamba, Faculty of Economic Sciences, University of Kisangani, Kisangani, Democratic Republic of the Congo.
[03] Koto-te-Nyiwa Ngbolua, Faculty of Science, University of Kinshasa, Kinshasa, Democratic Republic of the Congo; Faculty of Science, University of Gbado-Lite, Gbado-Lite, Democratic Republic of the Congo.
Abstract
This study aims to assess relationship between trade openness and unemployment in Democratic Republic of the Congo (DRC) concerning the period from 1991 to 2017. After using Vector Error Correction (VEC) model, the result showed a weak impact of trade openness on unemployment in the long-run. In addition, all explanatories variables: terms of exchange and inflation have each, a weak impact on unemployment. Indeed, results of computer fitting using Augmented Dickey-Fuller (ADF) Test revealed that all variables are stationary. Results have shown also that when trade openness increases about one percent; unemployment increases about 0.46 percent. That is correct for DRC because, expanding of trade openness leads to closing of local firms and by consequence, increases unemployment, but weakly. In addition, once the exchange terms varies about one percent, unemployment decreases about 0.72 percent. It means that, amelioration of exchange terms leads to increasing of purchase power for imported products, but it leads too at increasing of profits on exportations matters. Then enterprises of exportations matters, which constituted the main source of currency recipes for economy, are incited to increase their productions. Moreover, when inflation increases to one percent, unemployment increases at 0, 05 percent. According to the fact that unemployment does not react greatly to shocks of explanatories variables give evidence that government must support and help the firms to increase their capacity of innovation. Moreover, it must help enterprises to escalate as well, their competitiveness in the international concurrence. That will facilitates them to adapt their hiring politics to international competition.
Keywords
Trade Openness, Unemployment, Vector Error Correction
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