Analyzing the Relationship between Balance of Trade and Unemployment in the South African Economy

Abstract

This study examines the relationship between the Balance of Trade (BOT) and unemployment in South Africa from 2002 to 2022 aiming to assess whether the BOT positively or negatively affects employ-ment. The increasing openness of trade in a global context and discussions surrounding free and open interna-tional trade have sparked numerous studies and debates in recent years. Current trends suggest that govern-ments engage in trade agreements to foster international relationships, often underestimating their potential negative effects on domestic economies. This study aims to investigate and analyze the impact of the balance of trade on employment within the South African economy. Utilizing time-series data from the first quarter of 2002 to the fourth quarter of 2022, the research examines the relationship through unit root tests, stationary tests, multiple-breakpoint tests, an ARDL model, ECM, and residual and stability diagnostic tests using EViews software. The findings quantitatively confirm a significant direct linear relationship between BOT and unemployment in South Africa. Consequently, to enhance employment opportunities, stakeholders in both the private and public sectors must tackle the challenges associated with trade and unemployment, with the study offering several recommendations to revitalize the country's economic prospects.