The Impact of Government Fiscal Policies on Employment Levels in Afghanistan (2001–2022)

Abstract

Governments can influence economic conditions by employing various economic policies, among which fiscal policy plays a key role. Utilizing its two main instruments—taxation and government expenditure—fiscal policy enables governments to implement contractionary or expansionary measures to manage the economy. In times of recession, expansionary fiscal policy can serve as an effective tool to address economic challenges such as unemployment. This study aims to examine the impact of government fiscal policy on employment levels in Afghanistan during the period 2001 –2022. The research uses time series data collected from reliable sources such as the World Bank and the Ministry of Finance. Data analysis was conducted using a classical multiple regression model estimated through the Ordinary Least Squares (OLS) method in EViews software. Prior to model estimation, essential statistical tests for time series data—such as stationarity, normality, multicollinearity, autocorrelation, and homoscedasticity—were performed. The findings reveal that while fiscal policy contributed to employment growth in certain sectors—particularly construction and services—it did not have a statistically significant overall impact on employment levels throughout the studied period. Moreover, the effectiveness of fiscal policy has been constrained by challenges such as administrative corruption and inadequate infrastructure. The results of this research provide valuable insights for Afghan policymakers to improve fiscal policy implementation and promote sustainable employment and economic development in the country.