Causality Between Inflation, Economic Growth and Unemployment in North African Countries

Abstract

This paper investigates the relationship between unemployment rate, economic growth and inflation rate in North African countries between 1965 and 2016, using the vector error-correction model. We examine the causal relationship between economic growth, inflation and unemployment rate. In order to test the Granger causality, we applied the unit root test (Dickey–Fuller test and Phillips–Perron) and Johansen co-integration test. Our empirical results show a unidirectional causality running from inflation to economic growth, from economic growth to unemployment and from inflation to unemployment. Hence, we offer some economic implications that emerge from this study.