Unemployment in Western Balkan Candidates to European Union

Abstract

The aim of this thesis is to study the impact of macroeconomic indicators on unemployment rate in Western Balkan candidates to European Union (Albania, Bosnia and Herzegovina, Macedonia, Montenegro, and Serbia). Labor market conditions and developments in the Western Balkan economies share a number of similarities among them. These economies have a unique challenge which is high unemployment rate. To study the impact of macroeconomic indicators on unemployment rate, Vector Autoregression (VAR) model and Granger Causality tests are employed. Variables which are being studied in this research are unemployment rate, trade, Consumer Price Index (CPI), Gross Domestic Product (GDP), exchange rate, and interest rate of each country. Data used are annually and corresponds to the period from 2000 to 2015, taken from International Financial Statistics of International Monetary Fund and World Bank. The results show that unemployment rate is significantly affected by interest rate. This affect is valid for the sample of countries used in this study, from 2000-2015. But unemployment rate resulted to have impact on GDP.