Relationship between unemployment and policy uncertainty in Nigeria: ARDL evidence from 1990 to 2020

Abstract Nigeria has been facing policy uncertainty due to unemployment, poor infrastructure development, and weak foreign direct investment inflows. The government seeks policies that can effectively drive its macroeconomic activities as intervention. As such, this study assessed the determinants of policy uncertainty from 1990 to 2020. The dynamic autoregressive distributed lag approach was employed to analyse the positive and negative changes in policy uncertainty, as well as the reliability in macroeconomic activities such as unemployment, infrastructure development, and foreign direct investment inflows. The empirical evidence revealed short- and long-run relationship involving policy uncertainty with unemployment, infrastructure development, and foreign direct investment inflows. In particular, policy uncertainty positively affected macroeconomic activities that led to unemployment, infrastructural development and pessimistic foreign investors. Dynamic relationship seems to exists between policy uncertainty and macroeconomic activities in Nigeria. Risk-taking decisions had resulted in high unemployment rate, poor infrastructural development, and low foreign direct investment inflows.JEL classification: E24, D81, C22