How do clean energy sources and financial development affect unemployment? Empirical evidence from Egypt

Reducing unemployment rate to reach 5% is one of the most important priorities in Egypt’s Strategy for Sustainable Development. So, enhancing the finance of medium and small enterprises and attracting investors to clean energy resources sectors are considered the most important government’s priorities to achieve this strategic goal (UN 2018). Depending on this strategy, the study investigates the long-run and causal relationships between unemployment, financial development, population, and clean energy sources in Egypt from 1971 to 2014. Johansen and Juselius, auto-regressive distributed lag (ARDL), and vector error correction (VECM) approaches are employed to achieve this purpose. The results indicate that while clean energy resources have an adverse effect on unemployment, financial development and population have positive effect. The main findings of VECM reveal the existence of short run one-way causal relation from unemployment to financial development and from population to financial development and alternative energy sources. The main results imply that devoting domestic credit to renewable energy sector can help in providing job opportunities.