Does Okun’s Law Exist in Nigeria? Evidence from the ARDL Bounds Testing Approach

This study employs the autoregressive distributed lag (ARDL) bounds testing technique to examine whether Okun’s law exists in Nigeria during 1970-2014. In addition, this study considers the role of oil prices in the Nigerian economy. The empirical results indicate that a cointegrating or long term r...

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Published in:Contemporary economics 2017-06, Vol.11 (2), p.131-144
Main Author: Abu, Nurudeen
Format: Article
Language:English
Subjects:
ARDL
Developed countries
Economic development
Economic growth
Economic models
Energy and Environmental Studies
Evaluation research
Geography, Regional studies
Labor relations
Law
Long term
National Economy
Nigeria
Okun's law
Output growth
Petroleum
Policy making
Post-War period (1950 - 1989)
Present Times (2010 - today)
Prices
Transformation Period (1990 - 2010)
Unemployment
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description This study employs the autoregressive distributed lag (ARDL) bounds testing technique to examine whether Okun’s law exists in Nigeria during 1970-2014. In addition, this study considers the role of oil prices in the Nigerian economy. The empirical results indicate that a cointegrating or long term relationship exists between the unemployment rate, economic growth and oil prices. In addition, the results demonstrate that in Nigeria, in the long term, unemployment has a negative and significant effect on economic growth, and oil prices have a significant and positive effect on economic growth. The coefficient of unemployment (0.18%) for this study is far less than the result reported by Okun and other studies that focused on developed countries. This suggests that the Okun coefficient is not only unstable but varies for different countries, and does not remain constant for Nigeria. However, policymakers should take steps to reduce unemployment to enhance economic growth in Nigeria.
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source EBSCOhost Business Source Ultimate; International Bibliography of the Social Sciences (IBSS); Publicly Available Content Database; ABI/INFORM Global; PAIS Index
subjects ARDL
Developed countries
Economic development
Economic growth
Economic models
Energy and Environmental Studies
Evaluation research
Geography, Regional studies
Labor relations
Law
Long term
National Economy
Nigeria
Okun's law
Output growth
Petroleum
Policy making
Post-War period (1950 - 1989)
Present Times (2010 - today)
Prices
Transformation Period (1990 - 2010)
Unemployment
title Does Okun’s Law Exist in Nigeria? Evidence from the ARDL Bounds Testing Approach
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