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Examining Structural Unemployment in Sub-Saharan Africa: Empirical Evidence from Unobserved Components

Author

Listed:
  • Ashwin Madhou

    (Central Bank of Mauritius)

  • Tayushma Sewak

    (Central Bank of Mauritius)

Abstract

We apply multivariate filtering techniques to quantify structural unemployment (NAIRU), potential output, output gap and unemployment gap for South Africa, Kenya, Mauritius and Ghana. NAIRU estimates are especially relevant for these inflation-targeting or hybrid inflation-targeting economies, allowing them to assess level of domestic slack and any potential build-up of inflationary pressures. Our findings suggest that increased government spending on education, a competitive exchange rate, and boosting the level of financial development (measured as the market capitalization of listed companies) can play a role in lowering NAIRU in these Sub-Saharan African countries.

Suggested Citation

  • Ashwin Madhou & Tayushma Sewak, 2019. "Examining Structural Unemployment in Sub-Saharan Africa: Empirical Evidence from Unobserved Components," Open Economies Review, Springer, vol. 30(5), pages 895-904, November.
    • Handle: RePEc:kap:openec:v:30:y:2019:i:5:d:10.1007_s11079-019-09553-7
    DOI: 10.1007/s11079-019-09553-7
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    References listed on IDEAS

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    1. Chinn, Menzie David & Ito, Hiro, 2005. "What Matters for Financial Development? Capital Controls, Institutions, and Interactions," Santa Cruz Department of Economics, Working Paper Series qt5pv1j341, Department of Economics, UC Santa Cruz.
    2. Laurence Ball & Nicolás Roux & Marc Hofstetter, 2013. "Unemployment in Latin America and the Caribbean," Open Economies Review, Springer, vol. 24(3), pages 397-424, July.
    3. Mark Aguiar & Gita Gopinath, 2007. "Emerging Market Business Cycles: The Cycle Is the Trend," Journal of Political Economy, University of Chicago Press, vol. 115(1), pages 69-102.
    4. Andrea Bassanini & Romain Duval, 2006. "Employment Patterns in OECD Countries: Reassessing the Role of Policies and Institutions," OECD Economics Department Working Papers 486, OECD Publishing.
    5. Chinn, Menzie D. & Ito, Hiro, 2006. "What matters for financial development? Capital controls, institutions, and interactions," Journal of Development Economics, Elsevier, vol. 81(1), pages 163-192, October.
    6. Jakob Kapeller & Philipp Heimberger & Bernhard Schuetz, 2016. "What's 'structural' about unemployment in Europe: On the Determinants of the European Commission's NAIRU Estimates," ICAE Working Papers 47, Johannes Kepler University, Institute for Comprehensive Analysis of the Economy.
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    8. Patrick Blagrave & Mr. Roberto Garcia-Saltos & Mr. Douglas Laxton & Fan Zhang, 2015. "A Simple Multivariate Filter for Estimating Potential Output," IMF Working Papers 2015/079, International Monetary Fund.
    9. Ali Alichi, 2015. "A New Methodology for Estimating the Output Gap in the United States," IMF Working Papers 2015/144, International Monetary Fund.
    10. Franco Modigliani & Lucas Papademos, 1975. "Targets for Monetary Policy in the Coming Year," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 6(1), pages 141-166.
    11. Andrea Bassanini & Romain Duval, 2006. "The Determinants of Unemployment across OECD Countries," Post-Print halshs-00120584, HAL.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Ali Fakih & Nathir Haimoun & Mohamad Kassem, 2020. "Youth Unemployment, Gender and Institutions During Transition: Evidence from the Arab Spring," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 150(1), pages 311-336, July.
    2. Ashwin Madhou & Tayushma Sewak & Imad Moosa & Vikash Ramiah & Florian Gerth, 2021. "Towards Full-Fledged Inflation Targeting Monetary Policy Regime in Mauritius," JRFM, MDPI, vol. 14(3), pages 1-18, March.

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    More about this item

    Keywords

    NAIRU; Potential output; Unemployment gap; Kalman filter; Developing countries;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling

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