Macroeconomic Determinants of Unemployment in Ethiopia

Unemployment remains a critical macroeconomic challenge in Ethiopia. This study examines long-run and short-run relationships between unemployment and its macroeconomic determinants over 1984/85–2018/19, including external debt, inflation rate, foreign direct investment, population growth, and real gross domestic product. Using Augmented Dickey-Fuller tests and ARDL bounds testing, results demonstrate that all five variables significantly explain long-run unemployment, with all except population growth persisting in the short run. The error correction term indicates rapid adjustment to long-run equilibrium, suggesting policy interventions targeting external debt reduction, FDI attraction, and aggregate supply expansion could effectively reduce unemployment.