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

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  • Andrew Phiri

    () (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, 2019. "Fitting Okun's law for the Swazi Kingdom: Will a nonlinear specification do?," Economics Bulletin, AccessEcon, vol. 39(2), pages 1371-1383.
  • Handle: RePEc:ebl:ecbull:eb-18-00650
    as

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    References listed on IDEAS

    as
    1. Jonas D. M. Fisher & Jeffrey R. Campbell, 2000. "Aggregate Employment Fluctuations with Microeconomic Asymmetries," American Economic Review, American Economic Association, vol. 90(5), pages 1323-1345, December.
    2. Ghamz-e-Ali Siyal & Adeel Ahmed & Arshad Aziz & Khalid Zaman, 2013. "The Long Run Effects between Unemployment and Economic Growth in Selected SAARC Countries," Economic Research Guardian, Weissberg Publishing, vol. 3(2), pages 70-85, December.
    3. Enders, Walter & Siklos, Pierre L, 2001. "Cointegration and Threshold Adjustment," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(2), pages 166-176, April.
    4. Schaling, Eric, 2004. "The Nonlinear Phillips Curve and Inflation Forecast Targeting: Symmetric versus Asymmetric Monetary Policy Rules," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(3), pages 361-386, June.
    5. Enders, Walter & Granger, Clive W J, 1998. "Unit-Root Tests and Asymmetric Adjustment with an Example Using the Term Structure of Interest Rates," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(3), pages 304-311, July.
    6. Lee, Jim, 2000. "The Robustness of Okun's Law: Evidence from OECD Countries," Journal of Macroeconomics, Elsevier, vol. 22(2), pages 331-356, April.
    7. repec:wei:journl:v:3:y:2013:i:2:p:2-17 is not listed on IDEAS
    8. Dany Lang & Christian de Peretti, 2009. "A strong hysteretic model of Okun's Law: theory and a preliminary investigation," International Review of Applied Economics, Taylor & Francis Journals, vol. 23(4), pages 445-462.
    9. Andrew Phiri, 2014. "Nonlinear Co-Integration Between Unemployment and Economic Growth in South Africa," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 12(4 (Winter), pages 303-324.
    10. Brian Silverstone & Richard Harris, 2001. "Testing for asymmetry in Okun's law: A cross-country comparison," Economics Bulletin, AccessEcon, vol. 5(2), pages 1-13.
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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.;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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