Time Series Analysis of interaction between aggregate expenditure and job creation in South Africa

Abstract

Jobs are the pillars of the economy and aggregate expenditure is among the key factor used to create an employment stimulating environment. This study scrutinizes the relationship between the component of aggregate expenditure and job creation in South Africa form 1995 to 2014. The Vector Autoregressive (VAR) model and multivariate co-integration approach were employed to examine how household consumption, government, investment and export expenditures affect job creation in South Africa. Findings of this study revealed that there is long-run relationship between aggregate expenditure and job creation with government and investment expenditure being the key determinants of job creation in South Africa. Contrary to priori expectation, consumption and exports do not improve jobs creation in South Africa. In the short-run, there are no significant interactions between components of aggregate expenditure and job creation. This study provided recommendation that may assist in boosting job creation in South Africa.