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Andrew Phiri
''Fitting Okun's law for the Swazi Kingdom: Will a nonlinear specification do?''
( 2019, Vol. 39 No.2 )
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.
Keywords: Okun's law; Nonlinear autoregressive distributive lag (N-ARDL) model; Swaziland; Sub-Saharan African (SSA) country; Corbae-Oularis filter.
JEL: E3 - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)
O4 - Economic Growth and Aggregate Productivity: General
Manuscript Received : Aug 10 2018 Manuscript Accepted : May 31 2019

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