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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:Cyclical unemployment and cyclical output: an estimation of Okun's coefficient for South Africa
Authors:Marinkov, MarinaISNI
Geldenhuys, Jean-Pierre
Year:2007
Periodical:South African Journal of Economics
Volume:75
Issue:3
Pages:373-390
Language:English
Geographic term:South Africa
Subjects:unemployment
gross national product
External link:https://onlinelibrary.wiley.com/doi/10.1111/j.1813-6982.2007.00134.x/pdf
Abstract:Persistently high unemployment in South Africa, especially in the face of improved economic conditions since 1994, begs the question: Does unemployment in South Africa respond to changes in output? A. Okun's law (1962) refers to the inverse relationship that exists between cyclical output and cyclical unemployment. This paper estimates Okun's coefficient for the South African economy, using annual data from 1970-2005. Output and unemployment are decomposed into their trend and cyclical components, using a variety of detrending methods. The presence of structural breaks in Okun's relationship is also investigated, while cointegration analysis was also considered. Evidence of a statistically significant relationship between cyclical output and cyclical unemployment are found in both symmetric (estimates range from -0.77 to -0.16) and asymmetric (estimates range from -0.77 to -0.18) specifications of Okun's law, irrespective of the detrending technique. However, cyclical unemployment constitutes only a relatively small fraction of total (observed) unemployment, which implies that a more expansionary macroeconomic policy stance might only have a limited impact on total unemployment in South Africa. Bibliogr., notes, ref., sum. [Journal abstract]
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