The Linkages among Inflation, Unemployment and Crime Rates in Malaysia

This paper attempts to examine the linkages among inflation, unemployment and crime rates in Malaysia. The sample period covered annual data from 1970 to 2006. The Bartlett corrected trace test proposed by Johansen (2002) was employed as being appropriate for small sample study. The corrected trace test affirmed the existence of long run equilibrium relationship between crime rate and its determinants. The estimated cointegrating vector revealed that inflation and unemployment are positively related to crime rate. However, inflation is not significant in the short run. Finally, the empirical evidence suggests that the causality direction is running from inflation and unemployment to crime, but there is no evidence of reverse causality.