Investigating Okun's Law in Nigeria through the Dynamic Model

  • Patrick Olufemi ADEYEYE University of KwaZulu-Natal, Westville, Durban
  • Anthonia T. ODELEYE Department of Economics, University of Lagos
  • Olufemi Adewale ALUKO Department of Finance, University of Ilorin, Kwara State
DOI: https://doi.org/10.22610/jebs.v9i6(J).2003
Keywords: Okun’s law, unemployment, economic growth, dynamic model

Abstract

 Unemployment is a persistent challenge for countries, especially the developing ones. Nigeria as a developing country faces a herculean task reducing the increasing spate of joblessness amongst her citizens. Okun’s law explains the relationship between unemployment and economic growth in an economy. This study therefore investigates Okun’s law in Nigeria between 1985 and 2015 through the dynamic model. The generalized method of moments estimation result reveals that that present and past output growth are negatively related to unemployment rate. However, only past output growth has a significant effect on unemployment rate. It also shows that past unemployment rate is significantly and positively associated with present unemployment rate. The Toda-Yamamoto Granger non-causality test finds that there is no causality between unemployment and economic growth. This study presents evidence to partially support Okun’s law of inverse relationship between unemployment and output growth and suggests that promoting economic growth can be a policy tool for reducing unemployment rate in Nigeria. 

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References

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Journal of Economics and Behavioral Studies (ISSN: 2220-6140) Vol. 9, No. 6, pp. 39-46, December 2017
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Published
2018-01-15
How to Cite
ADEYEYE, P. O., ODELEYE, A. T., & ALUKO, O. A. (2018). Investigating Okun’s Law in Nigeria through the Dynamic Model. Journal of Economics and Behavioral Studies, 9(6(J), 39-46. https://doi.org/10.22610/jebs.v9i6(J).2003
Issue
Vol 9 No 6(J) (2017)
Section
Research Paper

Copyright (c) 2018 Patrick Olufemi ADEYEYE, Anthonia T. ODELEYE, Olufemi Adewale ALUKO

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