Abstract
AbstractThis paper estimates long‐memory models to analyse the stochastic behaviour of unemployment in eleven African countries (Botswana, Ethiopia, Ghana, Kenya, Malawi, Mauritius, Nigeria, Senegal, South Africa, Tanzania and Zambia) from the 1960s until 2010. The empirical results provide very strong evidence of lack of mean reversion in all series under examination. This suggests that hysteresis models are the most relevant for the African experience (not surprisingly, given the rigidities in their labour markets). Therefore in such countries shocks hitting the unemployment series will have permanent effects, and policy makers should take appropriate action to reverse the effects of negative shocks.
Highlights
Measuring the level of persistence in unemployment rates is of vital importance for the African economies: they suffer some of the highest unemployment rates in the world and it is essential for policy makers to be able to determine their degree of persistence in different countries, which will enable them to choose country-specific responses to external shocks
The natural rate theory implies that it should fluctuate around a stationary equilibrium level, known as the natural rate or non-accelerating inflation rate of unemployment (NAIRU), which is determined by economic fundamentals
This paper estimates long-memory models to analyse the stochastic behaviour of unemployment in eleven African countries (Botswana, Ethiopia, Ghana, Kenya, Malawi, Mauritius, Nigeria, Senegal, South Africa, Tanzania and Zambia) from the 1960s until 2010; it is the first academic study to do so
Summary
Measuring the level of persistence in unemployment rates is of vital importance for the African economies: they suffer some of the highest unemployment rates in the world and it is essential for policy makers to be able to determine their degree of persistence in different countries, which will enable them to choose country-specific responses to external shocks. Leon-Ledesma, 2002), or autoregressive fractionally integrated moving average models (ARFIMA) to test for long memory in unemployment (see, for instance, Gil-Alana, 2001, 2002). Phiri (2014) estimates a momentum threshold autoregressive model is to analyse nonlinear equilibrium reversion between unemployment and economic growth for South African data between the periods 2000 and 2013, but unlike us does not allow for possible longmemory properties. The contributions of this paper is twofold: first, it uses a new, much more extensive data set on African unemployment not previously analysed in empirical works, thereby offering new evidence; second, it applies for the first time long-memory techniques in this context. South African Journal of Economics published by John Wiley & Sons Ltd on behalf of Economic Society of South Africa methodology, Section 3 discusses the data and the empirical results, Section 4 offers some concluding remarks
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