Research Articles
A Flourishing or Faltering Economy: Unemployment Impacting Sri Lankan Economic Growth
Authors:
P. Atigala,
Sri Lanka Institute of Information Technology, LK
About P.
SLIIT Business School
T. Maduwanthi,
Sri Lanka Institute of Information Technology, LK
About T.
SLIIT Business School
V. Gunathilake,
Sri Lanka Institute of Information Technology, LK
About V.
SLIIT Business School
S. Sathsarani,
Sri Lanka Institute of Information Technology, LK
About S.
SLIIT Business School
Ruwan Jayathilaka
Sri Lanka Institute of Information Technology, LK
About Ruwan
SLIIT Business School
Abstract
The primary goal of any economy is to achieve long-term economic growth while maintaining a stable rate of unemployment, which is a macroeconomic factor. Moreover, when unemployment rises, real Gross Domestic Product (GDP) falls short of potential GDP. Accordingly, the purpose of this study is to examine the impact of unemployment on the economic growth of Sri Lanka. By using data from the first quarter (Q1) of 2000 to the fourth quarter (Q4) of 2021 and Vector Error Correction Model (VECM) and Granger Causality are applied to analyse the impact of unemployment on economic growth. The findings indicates that there is a unidirectional causality between unemployment and economic growth, and that there is a long run relationship between these two variables, with both long-term and short-term negative impacts on economic growth in Sri Lanka. Macroeconomic policies need to be formulated to sustain the unemployment rate in line with the current economic realities of Sri Lanka for sustainable economic growth and significant contribution to the creation of new jobs and the expansion of existing employment in Sri Lanka.
How to Cite:
Atigala, P., Maduwanthi, T., Gunathilake, V., Sathsarani, S. and Jayathilaka, R., 2023. A Flourishing or Faltering Economy: Unemployment Impacting Sri Lankan Economic Growth. Sri Lanka Journal of Economic Research, 10(2), pp.29–46. DOI: http://doi.org/10.4038/sljer.v10i2.182
Published on
03 Feb 2023.
Peer Reviewed
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