Open Access
On the Unemployment Output Relation in South Africa: A Non-Linear ARDL Approach
Author(s) -
Brian Tavonga Mazorodze,
Noureen Siddiq
Publication year - 2018
Publication title -
journal of economics and behavioral studies
Language(s) - English
Resource type - Journals
ISSN - 2220-6140
DOI - 10.22610/jebs.v10i5(j).2506
Subject(s) - unemployment , distributed lag , economics , autoregressive model , hysteresis , econometrics , lag , proposition , contraction (grammar) , macroeconomics , monetary economics , medicine , computer network , philosophy , physics , epistemology , quantum mechanics , computer science
The central aim of this paper is to establish the asymmetric effects of cyclical output on South Africa's unemployment rate. To achieve this objective, the non-linear autoregressive distributed lag model (NARDL) is applied on quarterly data spanning the periods 1994Q1-2017Q4. For every 10% economic contraction and expansion respectively according to the results, the response of the labour market is asymmetric in the long-run in that it loses more workers during contraction (10.3%) than it employs during recoveries (8%) supporting the labour market hysteresis. This is particularly true post the 2009 Global crisis suggesting that firms might have become more risk-averse to short-lived recoveries in recent years. The weak response of the labour market during expansions supports IMF’s recent proposition that economic recovery alone may not be enough to address South Africa's unemployment problem.