Author(s): Shem Otoi Sam, Moses M Manene, Isaac C Kipchirchir and Ganesh P Pokhariyal

Abstract: In this paper analysis of contribution of macroeconomic variables gross domestic product (GDP), external debt (ED), foreign direct investment (FDI), private investment (PI), youth population (POP), and youth literacy rate (LR) to youth unemployment (YUN) in Kenya over time is done. The analysis is done under framework of cointegration of time series data. First, logarithmic transformation of the series is carried out followed by stationarity test to determine the order of stationarity. The Philip-Ouliaris cointegration test is carried out to determine whether the series are individually cointegrated in a pair-wise manner. Then the Johansen cointegration test is conducted to determine the rank of cointegration. The paper does not proceed to identify cointegration relations as that is superfluous as far as estimation of linear cointegration model is concerned. Finally the linear cointegration equation of the macroeconomic variables is estimated and interpreted. Philip-Ouliaris test reveals that six pairs are I(0) while 15 pairs are I(1). The Augmented Dickey-Fuller test finds that GDP, FDI, and ED are stationary at level, i.e. without differencing whereas PI, LR, YUN, and POP are stationary of first difference. According to Johansen cointegration test, the rank of cointegration is 3, revealing three cointegration relations among the variables used. The results indicate that 1% increase in GDP, ED, FDI, and LR increases YUN by 0.356204%, 0.269%, 0.002441%, and 0.154216 respectively. Contrarily, 1% increase in population reduces youth unemployment by 0.350833%.The model is subjected to F-test and p-value test and found to be statistically significant.

Pages: 129-133 | Views: 676 | Downloads: 8

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