Fitting Okun's law for the Swazi Kingdom: Will a nonlinear specification do?

Phiri, Andrew (2018): Fitting Okun's law for the Swazi Kingdom: Will a nonlinear specification do? Published in:

Abstract

Despite Okun’s law being hailed one of the most fundamental pieces within macroeconomic policy paradigm, empirical evidence existing for the Kingdom of Swaziland remains virtually non-existent. Our study fills this void/hiatus in the literature by examining Okun’s law for the Swazi Kingdom by using the nonlinear autoregressive distributive lag (N-ARDL) model applied to data collected over 1991 to 2017. To ensure robustness of our empirical analysis, we further apply the Corbae-Oularis (C-O) filter to extract the gap variables required for empirical estimates. Remarkably, we find strong evidence for nonlinear Okun’s trade-off between unemployment and output growth in Swaziland with this trade-off being stronger during recessionary periods compared to expansionary periods. Much-needed policy enlightenment is drawn for Swazi authorities from our findings.

• Item Type: MPRA Paper
• Language: English
• Keywords: Okun’s law; Nonlinear autoregressive distributive lag (N-ARDL) model; Swaziland; Sub-Saharan African (SSA) country; Corbae-Oularis filter.
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; 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; 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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