Exchange Rate Pass-Through to Unemployment in Sub-Saharan Africa: Evidence from Nigeria and South Africa

International Journal of Economics and Management Studies

© 2020 by SSRG - IJEMS Journal

Volume 7 Issue 3

Year of Publication : 2020

Authors : Sunday Edesiri Akiri, Member Ahemen, John Abu

10.14445/23939125/IJEMS-V7I3P116

How to Cite?

Sunday Edesiri Akiri, Member Ahemen, John Abu, "Exchange Rate Pass-Through to Unemployment in Sub-Saharan Africa: Evidence from Nigeria and South Africa," SSRG International Journal of Economics and Management Studies, vol. 7,  no. 3, pp. 107-114, 2020. Crossref, https://doi.org/10.14445/23939125/IJEMS-V7I3P116

Abstract:

This study evaluates the exchange rate pass-through to unemployment in Africa using evidence from Nigeria and South Africa. The pass-through was analyzed using two different transmission channels: first, through exports to unemployment, and second, through imports to unemployment. Panel Structural Vector Auto-Regressive (SVAR) was employed to analyze the impact of the transmission on the unemployment rate using quarterly data spanning the period of 2007-2018. The findings of the study revealed that the exchange rate does not exert the desired impact on unemployment in Sub-Saharan Africa through the export and import channels, implying that depreciation in the exchange rate exacerbates the problem of unemployment in SSA. The study concludes that the pass-through channels of export and import possess the potentials to lower unemployment in Nigeria and South Africa; however, the latent effect through other intermediate variables is contrary, thereby inhibiting the pass-through. The study recommends amongst others that, first, export revenues should be channeled into more remunerative alternatives (such as power and transport networks) to drive investment in Sub-Saharan Africa; second, imports expenditure should not be discouraged. However, consumer goods should be substituted for capital goods in order to provide key inputs for the growing industrial sector in Sub-Saharan Africa.

Keywords:

Exchange Rate, Unemployment, Pass-through, Sub-Saharan Africa, Panel SVAR.

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