The determinants of unemployment in Swaziland : an econometric perspective and investigative analysis

Abstract

Unemployment is possibly the most economically crippling challenge facing the Kingdom of Swaziland today. Although unemployment affects other age groups, its effects are most evident amongst the youth. The problems of unemployment are made profound by the economy's inability to create new jobs at the same rate that new job seekers enter the labour market and this has resulted in the country having one of the highest unemployment levels on the African continent. This study therefore aims to examine the probable causes for the high unemployment rate in Swaziland and to propose policy recommendations that may be applied to alleviate the unemployment issue in the country The determinants of unemployment are analysed using cointegration analysis from an econometric perspective with annual data from 1991-2012. The study identifies the potential gross domestic product, inflation (indicated by the consumer price index) and government spending as some of the determinants of unemployment in Swaziland. The results suggest the existence of a long-nm relationship between unemployment and its determinants. For further examination of the relationship between unemployment and its determinants, the Granger causality technique and model simulation experiments were conducted. The simulation experiment revealed that the linear model is a good fit because the simulated (forecasted) unemployment tracks the actual values of unemployment.