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Testing for unemployment persistence in Nigeria

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Abstract

In this study, we examine the behaviour of unemployment in Nigeria using fractional integration & fractional cointegration techniques. Based on the fractional integration technique, we find that unemployment in Nigeria exhibits mean reverting properties but with a longer time horizon for any shock effect to fizzle out. The fractional cointegration technique reveals that unemployment shares somewhat common long run relationships with macroeconomic variables such as interest rate, inflation and output. Therefore, policy actions by relevant authority targeted at any of these macroeconomic variables may have implications on unemployment in Nigeria and vice versa. However, the results leading to these conclusions are sensitive to sample periods and intervening variables.

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Notes

  1. Changes in the underlying equilibrium unemployment rate due to the interplay of changes in real macroeconomic variables and institutions. The structuralist school assumes that unemployment is mean-reverting towards an occasionally changing natural rate.

  2. Excluding theoretical papers, the application of the FCVAR approach is limited, to the best of our knowledge, as few papers have been published in this regard. The most prominent involves commodity returns (see Dolatabadi, Nielsen, & Xu 2016; Dolatabadi et al. 2018) exchange rates (see Gil-Alana & Carcel 2018), Inflation persistence (Tule et al. 2020), Islamic stocks (Salisu et al. 2020), political support & economic voting (see Nielsen & Shibaev 2018; Jones, et al. 2014) and interlinkages between precious metals and Oil (Usman & Akadari, 2021).

  3. We use the Nielsen and Popiel (2018) Matlab program to estimate both the CVAR and the FCVAR models.

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Acknowledgements

The authors gratefully acknowledge the insightful comments and suggestions of the peer-reviewers towards improving the quality of this manuscript.

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Authors and Affiliations

  1. Monetary Policy Department, Central Bank of Nigeria, Abuja, Nigeria

    Ebuh U. Godday & Nuruddeen Usman

  2. Centre for Econometrics and Applied Research (CEAR), Ibadan, Oyo, Nigeria

    Afees A. Salisu

  3. Department of Economics, University of Pretoria, Pretoria, South Africa

    Afees A. Salisu

Authors
  1. Ebuh U. Godday
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  2. Nuruddeen Usman
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  3. Afees A. Salisu
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Correspondence to Nuruddeen Usman.

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Godday, E.U., Usman, N. & Salisu, A.A. Testing for unemployment persistence in Nigeria. Econ Change Restruct 55, 2605–2630 (2022). https://doi.org/10.1007/s10644-022-09395-3

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