The Effect of Financial Development on Unemployment in Emerging Market Countries

Raifu, Isiaka Akande; Afolabi, Joshua Adeyemi

doi:10.1177/09749101221116715

Cited by 11 publications

(8 citation statements)

References 73 publications

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“…In time series and panel studies, it is very important to ascertain the unit root properties of the variables of interest. This information is crucial in the choice of a suitable estimation technique to prevent spurious results that could lead to misleading policy formulation (Afolabi et al , 2022; Raifu and Afolabi, 2022). The unit root test approaches of Augmented Dickey Fuller (ADF) and Phillip Perron (PP) are adopted in this study.…”

Section: Resultsmentioning

confidence: 99%

Trade misinvoicing and domestic resource mobilization in Nigeria

Afolabi¹

2022

IJDI

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Purpose Mobilizing domestic resources has been a daunting task for the Nigerian government given its growing fiscal responsibilities and the limited domestic resources at its disposal. However, little is known empirically about the role trade misinvoicing plays in this regard. Hence, this study evaluates the effect of trade misinvoicing on domestic resource mobilization in Nigeria. Design/methodology/approach Sourcing annual data spanning 1981–2018 on key variables of interest, this study adopts the Dynamic Ordinary Least Squares (DOLS) estimation method to evaluate the effect of trade misinvoicing on domestic resource mobilization in Nigeria. Findings In conformity with extant studies, the result reveals that trade misinvoicing adversely affects domestic resource mobilization. It also showed that domestic resources are highly sensitive to the dynamics of trade misinvoicing in Nigeria. Other determinants of domestic resource mobilization in Nigeria include public debt, official development assistance, trade openness and inflation. Practical implications The study suggests the need to take expeditious and pragmatic actions against the rising tides of trade misinvoicing in Nigeria with a view to improving the volume of domestic resources required for financing development objectives. This will facilitate the achievement of the Sustainable Development Goals (SDGs) and enable Nigeria to maximally enjoy gains from trade. Originality/value There is an overwhelming evidence on the effect of foreign capital inflows on the Nigerian economy but, little is known about the effects of foreign capital outflows. Specifically, there is a dearth of studies on the effect of trade misinvoicing on domestic resource mobilization, particularly for Nigeria. Therefore, this study fills this knowledge gap by evaluating the effect of trade misinvoicing on domestic resource mobilization in Nigeria.

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Section: Resultsmentioning

confidence: 99%

Trade misinvoicing and domestic resource mobilization in Nigeria

Afolabi¹

2022

IJDI

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“…This, notwithstanding, financial development Granger causes unemployment with the direction of causality running from financial development to unemployment. However, Raifu and Afolabi (2022) examined the effect of financial development on the distribution of employment in emerging market countries taking into consideration the age groups and gender dichotomy. Their findings show that financial development has a reducing effect on the distribution of unemployment, albeit the reducing effect of financial development on unemployment varies across the working-age population and youths.…”

Section: Empirical Reviewmentioning

confidence: 99%

“…These functions include the mobilisation of funds from the surplus sections of the economy to the cash-constrained sections of the economy, effective allocation of funds to several sectors of the economy, engaging in supervision and monitoring of investments used the borrowed money for, managing and diversifying the investment risks and facilitating trading of goods and services (i.e., exchange of good and services). By performing these functions, financial markets engender capital accumulation and technological innovation that would spur economic growth (Raifu & Afolabi, 2022). Given these theoretical connections between financial development and economic growth, several studies have examined the influence of financial development on economic growth including other areas of the economy such as investment, total factor productivity, sectoral performance, trades, poverty and inequality, even though empirical findings appear to be mixed (Valickova et al, 2015;Isah and Soliu, 2016;Muyambiri and Odhiambo, 2018;Ni and Liu, 2019;Aminu et al, 2019aAminu et al, , 2019bRaifu & Folarin, 2020;Adeboje et al, 2021, Afolabi, 2022.…”

Section: Introductionmentioning

confidence: 99%

“…In recent times, some researchers have begun to examine how financial development influences unemployment in different countries (Ajide, 2020;Bayar, 2016;Ibrahiem & Sameh, 2020;Ogbeide et al, 2016;Raifu, 2019;Raifu & Afolabi, 2022;Shabbir et al, 2012). However, these small but growing studies have yielded mixed empirical findings.…”

Section: Introductionmentioning

confidence: 99%

“…However, Raifu (2019) studies the effect of financial development on unemployment in Nigeria and submits that the effect of financial development on unemployment depends on the measures of financial development. In a comprehensive or an in-depth study on how financial development affects unemployment in EMCs using broad-based measures of financial development provided by the International Monetary Fund (IMF), Raifu and Afolabi (2022) find that even though financial development reduces unemployment, however, its negative effect varies across the distributions of different categories of unemployment. Apart from the mixed empirical findings from the existing studies, to the best of our knowledge, we do not come across any study that has verified how financial development affects unemployment in the Middle East and North African countries (MENA, hereafter).…”

Section: Introductionmentioning

confidence: 99%

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Financial Development and Unemployment in MENA: Evidence from Heterogeneous Panel Causality and Quantile via Moment Regression

2023

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The high rate of unemployment is one of the socio-economic problems bedevilling the MENA region. Theoretical and empirical arguments remain divided regarding financial development’s role in addressing unemployment. In light of this, this study investigates the effect of financial development on different components of unemployment (total (adult and youth) and gender (male and female)) in MENA. To capture financial development, we used the IMF composite financial development index. For robustness, we also computed an index of financial development from different measures of financial development made available by the World Bank. These measures of financial development include financial depth, financial efficiency, financial stability and financial access. By the panel quantile via the method of moment (Machado & Silva, 2019 ), our results show that financial development has a significant negative effect on unemployment across the quantiles, but the impact reduces as we move from the lower quantiles to the higher quantiles. Also, using heterogeneous panel causality (Dumitrescu and Hurlin ( 2012 )), our findings are further highlighted as follows: First, in most cases, there is a unidirectional causality between financial development and unemployment, especially total and male unemployment for youths and adults. The direction of causality runs from financial development to unemployment. Therefore, given that financial development lessens the rate of unemployment, our policy implication is that relevant authorities or policymakers need to implement sound financial development initiatives to reduce the levels of unemployment.

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Government expenditure and unemployment nexus in Nigeria: Does institutional quality matter?

Raifu,

Aminu,

Afolabi

et al. 2024

Journal of Public Affairs

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This study investigates the role of institutional quality in the government expenditure‐unemployment nexus in Nigeria using different components of government expenditures (total, recurrent, and capital expenditures). Causality tests and the autoregressive distributed lag estimation methods are used to analyse data spanning the period from 1984 to 2019. The key findings are as follows: (i) unidirectional causality runs from unemployment to total and capital expenditure and a partial unidirectional causality runs from recurrent expenditure to unemployment; (ii) total and capital expenditures are pro‐employment in the long run, while the recurrent expenditure is only pro‐employment in the short run; (iii) institutional quality is detrimental to employment in the long run; and (iv) institutional quality significantly moderates the impact of government expenditure on unemployment in Nigeria. The Nigerian government need to increase pro‐employment expenditure and make concerted efforts at improving the institutional quality in Nigeria.

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The Effect of Financial Development on Unemployment in Emerging Market Countries

Cited by 11 publications

References 73 publications

Trade misinvoicing and domestic resource mobilization in Nigeria

Trade misinvoicing and domestic resource mobilization in Nigeria

Financial Development and Unemployment in MENA: Evidence from Heterogeneous Panel Causality and Quantile via Moment Regression

Government expenditure and unemployment nexus in Nigeria: Does institutional quality matter?

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