Okun's Law Revisted : Evidence for Nigeria (1980- 2014)

Ojapinwa, T.V ; Lawanson, O.I (2016)

Staff Publications

Article

This paper analyzes the applicability of Okun's law to the Nigerian economy. Analysis of Okuri's law serves as an interesting case study due to the noticeable high level of unemployment rate as well as high growth in Nigeria. Using annual time series data over the period 1980-2014, the study uses Okun on both the difference and the gap models originally postulated by Ohm's. The study employs Augmented Dickey Fuller test to determine and inverse root and found out that the data employed are unit root free and the (V AR) equation. is stable (stationary). However, the results obtained from VAR Granger Causality/Block Exogeneity Wald Tests show that individually and collectively there is no granger causality between GDP growth and unemployment rate. The results from impulse response of economic growth to unemployment display lack of linkage between the two macroeconomic variables in Nigeria. The results from robust OLS suggest positive relationship without any level of significance. The results based on the two models and from the three empirical outputs suggest economic growth does not explain the unemployment problem in Nigeria. The study therefore concludes that Okun's law is not valid for Nigeria.