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

Kambale Kavese () and Andrew Phiri ()
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Kambale Kavese: Eastern Cape Socio Economic Consultation Council

No 1819, Working Papers from Department of Economics, Nelson Mandela University

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 advices 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.

Keywords: Economic growth; unemployment; Okun’s law; Provincial analysis; nonlinear ARDL model; Corbae-Ouliaris filter; South Africa; Emerging economies. (search for similar items in EconPapers)
JEL-codes: C13 C32 C51 E24 O40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2018-05
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http://repec.mandela.ac.za/RePEc/mnd/wpaper/paper.1819.pdf First version, 2018 (application/pdf)

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