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A Provincial Perspective of Nonlinear Okun’s Law for Emerging Markets: The Case of South Africa

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  • Kavese Kambale

    (Eastern Cape Socio-Economic Consultation Council, East London, South Africa, 5217)

  • Phiri Andrew

    (Nelson Mandela University,Port Elizabeth, South Africa)

Abstract

A provincial analysis of Okun’s law in South Africa is provided in this article from 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 advises that the epicenter of policy efforts in addressing the country’s high unemployment and low economic growth dilemma should be concentrated at a provincial level.

Suggested Citation

  • Kavese Kambale & Phiri Andrew, 2020. "A Provincial Perspective of Nonlinear Okun’s Law for Emerging Markets: The Case of South Africa," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 30(3), pages 59-76, September.
    • Handle: RePEc:vrs:suvges:v:30:y:2020:i:3:p:59-76:n:3
    DOI: 10.2478/sues-2020-0017
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    More about this item

    Keywords

    Economic growth; unemployment; Okun’s law; Provincial analysis; nonlinear ARDL model; Corbae-Ouliaris filter; South Africa; Emerging economies;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • 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
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • 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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