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Empirical analysis of economic performance and metal prices in Peru using svar and okun's law

Author

Listed:
  • Carlos David Cardona-Arenas

    (Universidad de Manizales)

  • Daniel Osorio-Barreto

    (Universidad Nacional de Colombia
    Universidad Autónoma de Manizales)

  • Diego Alejandro Manrique

    (Luis Amigó University)

Abstract

Observing the growth and improvements in the Peruvian labor market over the past 27 years, this study aims to test the validity of Okun's Law hypothesis for Peru during the period 1992–2019. To achieve this, a novel methodology is proposed, which involves calculating the production gap and unemployment gap. Firstly, a proxy variable for the time-varying natural rate of unemployment and a measure of potential output are calculated, both following the methodological approach suggested by the literature. Subsequently, a structural vector autoregressive model (S-VAR) is estimated to capture the lagged effects of Okun's theoretical relationship. The main findings of the study suggest that shocks in the precious metal price index impact both the production gap and the unemployment gap, confirming that the international dynamics of precious metal prices play a crucial role in economic performance when analyzed from the perspective of Okun's Law. This article demonstrates, in the context of a Latin American country, that Okun's law can be fulfilled by considering a fundamental analysis of the determinants of economic growth.

Suggested Citation

  • Carlos David Cardona-Arenas & Daniel Osorio-Barreto & Diego Alejandro Manrique, 2025. "Empirical analysis of economic performance and metal prices in Peru using svar and okun's law," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 38(1), pages 1-20, March.
    • Handle: RePEc:spr:minecn:v:38:y:2025:i:1:d:10.1007_s13563-024-00434-1
    DOI: 10.1007/s13563-024-00434-1
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