Testing Okun’s law in South Africa

Sanele Stungwa and Siphuxolo Tozamile

MPRA Paper from University Library of Munich, Germany

Abstract: The objective of this study is to test the existence of Okun’s coefficient in South Africa. The study used an annual data spanning from 1995 to 2020. The study employed error correction model(ECM) which tests a short run relationship between the variables under the study. The granger causality test is also applied the check the short run causal relationship between the variables. The findings of the study show that there is a negative and significant relationship between unemployment and gross domestic product in the short run. Therefore, Okun’s Law exists in South Africa. The results from granger causality test show that GDP granger cause unemployment in South Africa. Therefore, the study suggests that policymaker should focus on balancing labour intensive and capital-intensive jobs, and also to encourage entrepreneurship and proper education and training.

Keywords: Gross domestic product; unemployment rate; Okun’s coefficient; South Africa (search for similar items in EconPapers)
JEL-codes: C1 J64 O4 (search for similar items in EconPapers)
Date: 2021-11-30
New Economics Papers: this item is included in nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:110936

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