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

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  • Andrew Phiri

    (Department of Economics, Nelson Mandela University)

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.

Suggested Citation

  • Andrew Phiri, 2018. "Fitting Okun's law for the Swazi Kingdom: Will a nonlinear specification do?," Working Papers 1829, Department of Economics, Nelson Mandela University.
    • Handle: RePEc:mnd:wpaper:1829
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    References listed on IDEAS

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    More about this item

    Keywords

    Okun’s law; Nonlinear autoregressive distributive lag (N-ARDL) model; Swaziland; Sub-Saharan African (SSA) country; Corbae-Oularis filter.;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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