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ABSTRACT
This paper studied that growth ofunemployment is decreasing at the rate of0.677% per year during 1991-2014 insignificantly but its exponential declining growth rate is 0.033% which is significant. The unemployment growth rate series does not follow random walk and it has one downward structural break in 2010. The smooth cycle was obtained through Hodrick-Prescott Filter model.AR and AJUMA models of this series are nonstationary. On the nexus issue ,the study analysed that one percent increase in GDP growth rate led to 0.0579% decline in unemployment growth rate during 19912014 in India which is insignificant. The Okun's law is verified but found insignificant. Both have bidirectional causality but Johansen cointegration showed insignificant. The VAR and VEC models are stable but VAR is converging and VECM is diverging where coefficient of error correction in the change of unemployment growth rate is very slow and insignificant. The same observations were found in the nexus between the GDP per capita growth rate and unemployment growth rate in India during 1991-2014.
Keywords - GDP Growth Rate, Unemployment Growth Rate, Causality, Cointegration, VAR, VECM
JEL-E22, E24, D47, J23, J60, J65,
(ProQuest: ... denotes formulae omitted.)
1. INTRODUCTION
Keynesian and post-Keynesian analysis on income-employment theory has become a new part of the research on macroeconomics in the form of nexus between GDP growth and employment growth rate because global liquidity crisis, global current account imbalance and global financial crises dismantled the theories of employment or unemployment. Neither Classical nor Keynesian or Neo-Keynesian is quite satisfactory to answer all relevant causes of underemployment in relation with the endogenous growth theory. However, there are more than 10000 research papers on the growthemployment/unemployment in which empirical research are many for individual countries and developing and developed countries as a whole.
The nexus between growth rate of GDP and unemployment growth rate varies from country to country, region to region and also varies from period to period. In the long run, this nexus is related to multiple factors which are heterogeneous and are not identical to all countries. In the present digital age the problems of labour market have changed too and aggregate demand and supply analysis for equilibrium have been diversified. Even, there is an impact of global monetary and fiscal policy,...