The determinants of unemployment in South Africa

Unemployment is a major macroeconomics issues that faced by the developed countries as well as the developing country in the global world. This study is to examine the factors that affect the unemployment in South Africa. The data period that used for this study is annual data from 1985 to 2016. The factors that are brought into the discussion are population growth, inflation rate, gross domestic product, foreign direct investment. The data analyzed by using the modeling methodology such as Johansen's cointegration tests and Granger causality test that based on the Vector Error Correction Model (VECM). Before these methodologies are applied, the unit root test which consists of the Augmented Dickey Fuller (ADF) and Philip-Perron test (PP) used to test whether the variable is stationary or not and diagnostic checking also used. The findings had shown that all the variables are nonstationary at level but become stationary after the first differences. The result also had shown the presence of the long run relationship among the variables. All the variables are significant in this study. The findings had shown that the negative relationship between population and unemployment rate as well as gross domestic product growth and unemployment rate. The positive relationship is shown between the inflation rate and unemployment rate as well as foreign direct investment and unemployment rate.