The determinants of unemployment rate: the case of Thailand

Abstract

This study aimed to analyze factors that affected the unemployment rate in Thailand during 2011 to 2021, including inflation rate, real GDP growth rate, real gross fixed capital formation, real exports of goods and services, the dummy variables of year quarters and the dummy variable of COVID-19 by utilizing ordinary least square (OLS) method on the quarterly time series data from Q1:2011 to Q3:2021 from BOT, MOC, and NESDC. The results revealed that the predictor variables significantly produced an effect on the unemployment rate up to 59.2%. Only three predictors produced significant effects on the unemployment rate: inflation rate and real exports of goods and services (negative effect), and the dummy variables of year quarters. The forecasted unemployment rate in Q4:2021 = 2.02% if COVID-19 was present, which was different by 0.1% in the case of the COVID-19 was not present (1.92%). There was an interaction between real GDP growth rate and inflation rate producing an effect on the unemployment rate by 4.97%. From the interaction term analysis, the result indicated that if the real GDP growth rate increased by 1%, on average, the Phillips curve holds only when the inflation rate is less than 0.65%. Moreover, if the real GDP growth rate was in the low or medium levels, the higher the inflation level, the unemployment rate would decrease, while if the real GDP growth rate was in the high level, the higher the inflation level, the unemployment rate would increase.