An Assessment of the Severity of Unemployment in Nigeria: Evidence from Fractional Integration

ABSTRACT

This paper estimates the degree of persistence and level of unemployment, fairly consistent with the theoretical definition of the natural rate of unemployment for Nigeria. It argues that hysteresis exists on real borderline with an upward sloping Phillips curve, an indication that the optimization problem of the Central Bank of Nigeria could be less costly than was originally envisaged.

KEYWORDS:

• Unemployment
• long memory
• fractional integration

Notes

¹ Computed as the sum of unemployment and inflation.

² The original work was published in 1935. Other editions include the German edition (September 7, 1936); the Japanese edition (December 4, 1936); and the French edition (February 20, 1939).

³ See E-views 9 user guide II on equation diagnostic, p. 120.

⁴ This is estimated as: ; where π is inflation rate; (e) is unemployment rate; and y is a vector of other variables. Under the assumption of downward slopping Phillips curve NAIRU could be computed as:(see Staiger, Stock, & Watson, 1997).