Economic and Financial Review
Publisher
Central Bank of Nigeria
Keywords
BRICS countries, Okun’s law, panel ARDL, potential output, unemployment
Abstract
The unemployment-output nexus is a topical issue in developing countries, particularly with some evidence against the trade-off suggested by Okun’s law. This study, therefore, investigates the validity of Okun’s law in the BRICS countries and Nigeria, based on annual data between 1993 and 2020, using the Panel ARDL model. We validate the Okun’s law with evidence of an inverse relationship between output and unemployment in the BRICS countries and Nigeria. We, therefore, recommend that policymakers should boost both nominal and potential output by fully diversifying the economy to enhance productivity and reduction in the unemployment rate. We also recommend that the BRICS countries and Nigeria should deploy more of their population into technology-driven economic activities such as the information and communication technology (ICT) sub-sector of the economy and productive sectors that are labour intensive such as agriculture to absorb the available labour and boost output and lower unemployment rate.
Publication Title
CBN Economic and Financial Review
Issue
2
Volume
60
First Page
71
Last Page
91
Classification-JEL
C23, E24, F43, J62, O47
Recommended Citation
Aminu, U., Abel, A., and Garba, A. R. (2022). Does the Okun's Law Hold in the BRICS Countries and Nigeria? CBN Economic and Financial Review, 60(20). 71 - 91.