Revista Tinerilor Economiºti (The Young Economists Journal)

Revista Tinerilor Economişti (The Young Economists Journal)
IMPLICATIONS OF AGGREGATE DEMAND ON EMPLOYMENT: EVIDENCE FROM THE
ROMANIAN ECONOMY 46
Lect. Emilia Herman Ph. D 47
“Petru Maior” University
Faculty of Economics, Law and Administrative
Sciences, Tg. Mureş, Romania
Abstract: The contribution of aggregate demand to employment creation
is a fact universally accepted in the specialty literature, there being the idea
that between aggregate demand and employment there is a direct and
bivalent relationship. In our study we aim to highlight the influence of
aggregate demand and its components (final consumption, investments and
net export) on employment in Romania, in the period between 1990 and
2009. The results of this research show that, in Romania, in the last two
decades, between agregate demand and employment, as well as between
final consumption and employment we can identify a negative relationship,
fact that comes in conflict with the economic theory. Moreover, the results of
our study show that in order to increase employment in Romania we need to
act so as to increase investments and to adapt the domestic supply to the
requirements of the domestic and international market.
JEL classification: E21, E22, E24, J23
Key words: aggregate demand, final consumption, investments, net export, domestic
supply, employment.
1. Introduction
Employment – is the main content, foundation of existence and operation of the
labour market, it is its tough core. In relation to labour demand, employment is a
dependent variable, derived from the status, structure and functionality of the other
markets (goods and service market, capital market etc.), that are in interaction.
According to the economic theory (especially the Keynes’s theory) the level,
structure and evolution of employment or non-employment in a country are driven by the
level, structure, and evolution of aggregate demand (made up of consumption, investment
and net export), that in its turn is influenced by the quantitative and qualitative
dimensions of employment [4]. As a rule, there is a direct and bivalent relationship
between employment and aggregate demand. Also, the reduction of domestic supply of
goods and services by replacing domestic production with supply provided by imports
has as result the reduction of employment. J. M. Keynes, in “The General Theory of
46 Acknowledgements. This work was supported from the European Social Fund through
Sectoral Operational Programme Human Resources Development 2007-2013, project number
POSDRU-89/1.5/S/59184 „Performance and excellence in postdoctoral research in Romanian
economics science domain”
47 Postdoctoral researcher, The Bucharest Academy of Economic Studies, Romania
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