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Open AccessArticle

Causality Effects among Gross Capital Formation, Unemployment and Economic Growth in South Africa

1
Economic Sciences, North West University, Vanderbjilpark 1900, South Africa
2
Management Sciences, Walter Sisulu University, Butterworth 4960, South Africa, [email protected]
*
Author to whom correspondence should be addressed.
Economies 2020, 8(2), 26; https://doi.org/10.3390/economies8020026
Received: 12 February 2020 / Revised: 18 March 2020 / Accepted: 26 March 2020 / Published: 3 April 2020
(This article belongs to the Special Issue FDI (Foreign Direct Investment) and Economic Growth)
Stagnant economic growth, decreasing investment and high unemployment remain consistent macroeconomic challenges for South Africa. Gross Capital formation (GCF) is designed to improve employment and economic growth (GDP). This study investigates the causality effects of the three variables using time series data from 1980 to 2018 in a Vector Autoregressive (VAR) framework. Results of the first model reveal a positive long-term relationship between gross capital formation GCF and economic growth GDP. Contrariwise, the first model indicates that unemployment (UNEMP) does not influence economic growth (GDP) in the short run. The second model results reveal a significant and positive relationship between UNEMP and GCF, while the third model shows an inverse relationship between GDP and UNEMP. Based on these findings, the study therefore recommends that fiscal authorities introduce expansionary fiscal policy that stimulates economic growth, investment and employment. View Full-Text
Keywords: unemployment; economic growth; capital formation; vector autoregressive; South Africa unemployment; economic growth; capital formation; vector autoregressive; South Africa
MDPI and ACS Style

Pasara, M.T.; Garidzirai, R. Causality Effects among Gross Capital Formation, Unemployment and Economic Growth in South Africa. Economies 2020, 8, 26.

AMA Style

Pasara MT, Garidzirai R. Causality Effects among Gross Capital Formation, Unemployment and Economic Growth in South Africa. Economies. 2020; 8(2):26.

Chicago/Turabian Style

Pasara, Michael T.; Garidzirai, Rufaro. 2020. "Causality Effects among Gross Capital Formation, Unemployment and Economic Growth in South Africa" Economies 8, no. 2: 26.

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