A provincial perspective of nonlinear Okun's law for emerging markets: The case of South Africa

Kavese, Kambale and Phiri, Andrew (2018): A provincial perspective of nonlinear Okun's law for emerging markets: The case of South Africa.

Abstract

A provincial analysis of Okun’s law in South Africa is provided in this article over a period of 1996 to 2016. Empirically, we rely on the nonlinear autoregressive distributive lag (N-ARDL) model whilst the Corbae-Ouliaris filter is used to extract the ‘gap’ variables required for our regression estimates. Okun’s law is found to be significant hold in the long-run exclusively for the Western Cape and Kwa-Zulu Natal provinces whereas the remaining provinces partially display significant short-run effects. Our sensitivity analysis in which panel N-ARDL estimations for all provinces finds insignificant long-run Okun effects for the country as a whole, whilst validating the relationship only in the short-run. Our study hence implies that/advices that the epicentre of policy efforts in addressing the country’s high unemployment and low economic growth dilemma should be concentrated at a provincial level.

• Item Type: MPRA Paper
• Language: English
• Keywords: Economic growth; unemployment; Okun’s law; Provincial analysis; nonlinear ARDL model; Corbae-Ouliaris filter; South Africa; Emerging economies
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C13 - Estimation: General; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General

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