Abstract
Abstract. The main purpose of the article was to establish the effects of monetary policy on unemployment in Namibia. The article used the structural VAR methodology in a macroeconometric setting to achieve this. The results show that monetary policy affects unemployment in Namibia in the short run and in the long run, it is ineffective. These results differ from the results by Alexius & Holmlund (2007) and Jacobs et al. (2003) who found that monetary policy has a significant role to play in explaining unemployment in both the short run and the long run. This means that there is still need to investigate the other explanations of long run unemployment in Namibia such as the demand and supply related variables so that appropriate policies are propounded to address it effectively.
Keywords. Unemployment, Structural VAR, Impulse response, Variance decomposition, Namibia, Macroeconometric modelling.
JEL. E52, J64.
References
Ajilore, T., & Ikhide, S. (2013). Monetary policy shocks, output and prices in South Africa: A test of policy irrelevance proposition, The Journal of Developing Areas, 47(2), 363–386. doi. 10.1353/jda.2013.0039
Alexius, A., & Holmlund, B. (2007). Monetary policy and Swedish unemployment fluctuations, CESifo Working Paper.
Algan, Y., Cahuc, P., & Zylberberg, A. (2002). Public employment and labour market performance. Economic Policy, 17(34), 7-66.
Amisano, G., & Serati, M. (2003). What goes up sometimes stays up: shocks and institutions as determinants of unemployment persistence, Scottish Journal of Political Economy, 50(4), 440-470. doi. 10.1111/1467-9485.5004005
Amisano, G., & Giannini, C. (1997). Topics in Structural VAR Econometrics, Berlin: Springer.
Baffoe-Bonnie, J., & Gyapong, A.O. (2012). The dynamic implications for wage changes on productivity, prices, and employment in a developing economy: A structural VAR Analysis, The Journal of Developing Areas, 46(2), 397–417. doi. 10.1353/jda.2012.0029
Berkelmans, L. (2005). Credit and Monetary Policy: An Australian SVAR, Reserve Bank of Australia, Canberra, ACT.
Bernanke, B. S. (1986). Alternative explanations of the money-income correlation. In Carnegie-Rochester conference series on public policy, 25, 49-99. North-Holland.
Bernanke, B.S., & Mihov, I. (1998). The liquidity effect and long-run neutrality, In Carnegie-Rochester conference series on public policy, 49, 149-194. North-Holland.
Bernanke, B.S., (1986). Alternative Explorations of the Money Income Correlation. Carnegie Rochester Conference Series on Public Policy, 25, 49–99.
Blanchard, O.J., Quah, D., (1989). The dynamic effects of aggregate demand and aggregate supply disturbances. American Economic Review, 79, 655–673.
Brischetto, A., & Voss, G., (1999). A Structural vector autoregression model of monetary policy in Australia. Economic Research Department, Reserve Bank of Australia.
Carstensen, K., & Hansen, G. (2000). Cointegration and Common Trends on the West German Labour Market, Munich Reprints in Economics, University of Munich, Department of Economics 19947.
Christiano, L.J., Eichenbaum, M., & Evans, C.L. (1999). Monetary policy shocks: What have we learned and to what end?. Handbook of macroeconomics, 1, 65-148.
Christiano, L.J., Eichenbaum, M., & Evans, C.L. (2005). Nominal rigidities and the dynamic effects of a shock to monetary policy, Journal of Political Economy, 113(1), 1-45. doi. 10.1086/426038
Christiano, L.J., Gust, C., & Roldos, J. (2004). Monetary policy in a financial crisis, Journal of Economic Theory, 119(1), 64-103. doi. 10.1016/S0022-0531(03)00228-X
Christoffel, K.P., & Linzert, T. (2005). The role of real wage rigidity and labour market frictions for unemployment and inflation dynamics. Discussion Paper Series 1, Economic Studies, No 11/2006.
Disyatat, P., & Vongsinsirikul, P. (2003). Monetary policy and the transmission mechanism in Thailand, Journal of Asian Economics, 14, 389–418. doi:10.1016/S1049-0078(03)00034-4
Dolado, J.J., Felgueroso, F., & Jimeno, J.F. (1997). The Effects of Minimum Bargained Wages on Earnings: Evidence from Spain, Working Papers, 97-104, FEDEA.
Dolado, J.J., & Jimeno, J.F. (1997). The causes of Spanish unemployment: A structural VAR approach. European Economic Review, 41(7), 1281-1307. doi. 10.1016/S0014-2921(97)00058-5
Dungey Y.M., & Pagan, A. (2000). A structural VAR model of the Australian economy, Economic Record, 76, 321–342. doi:10.1111/j.1475-4932.2000.tb00030.x
Dungey, M., & Pagan, A. (2009). Extending a SVAR model of the Australian economy, Economic Record, 85, 1–20. doi:10.1111/j.1475-4932.2008.00525.x
Eichenbaum, M., & Evans, C. (1995). Some empirical evidence on the effects of monetary policy shocks on exchange rates. Quarterly Journal of Economics, 110(4), doi. 975-1009 doi:10.2307/2946646
Enders, W. (2004). Applied Econometric Time Series, Second Edition. London: Wiley.
Fabiani, S., Locarno, A., Oneto, G. P., & Sestito, P. (2001). The sources of unemployment fluctuations: an empirical application to the Italian case, Labour Economics, 8(2), 259-289. doi. 10.1016/S0927-5371(01)00029-X
Faust, J., & Leeper, E.M. (1997). When do long-run identifying restrictions give reliable results?, Journal of Business & Economic Statistics, 15, 345–353. doi:10.1080/07350015.1997.10524712
Favero, C.A., & Favero. (2001). Applied macroeconometrics. Oxford: Oxford University Press.
Fonseca, J.R. (2008). The application of mixture modeling and information criteria for discovering patterns of coronary heart disease, Journal of Applied Quantitative Methods, 3(4), 292–303.
Fragetta, M. (2010). Monetary policy and identification in SVAR models: A Data Oriented Perspective. MPRA Paper No. 20616.
Fragetta, M., & Melina, G. (2013). Identification of monetary policy in SVAR models: a data-oriented perspective. Empirical Economics, 45(2) 831-844. doi. 10.1007/s00181-012-0632-y
Gambetti, L., Pistoresi, B. (2004). Policy matters: the long run effects of aggregate demand and mark-up shocks on the Italian unemployment rate, Empirical Economics, 29(2), 209–226. doi. 10.1007/s00181-003-0159-3
Gujarati, D. N. (2012). Basic econometrics, Fourth Edition, Tata McGraw-Hill Education.
Jacobs, J.P.A.M., Kuper, G.H., & Sterken, E. (2003). A structural VAR model of the euro area. In CPB Workshop on Economic Policy Modelling, The Hague, November.
Jacobson, T., Vredin, A., & Warne, A. (1997). Common trends and hysteresis in Scandinavian unemployment, European Economic Review, 41(9), 1781-1816. doi. 10.1016/S0014-2921(96)00027-X
Karanassou, M., &Sala, H. (2010). Labour market dynamics in Australia: What drives unemployment?, Economic Record, 86, 185–209. doi. 10.1111/j.1475-4932.2009.00597.x
Kim, S., & & Roubini, N. (2000). Exchange rate anomalies in the industrial countries: A solution with a structural VAR approach. Journal of Monetary Economics, 45(3), 561-586. doi. 10.1016/S0304-3932(00)00010-6
Linzert, T. (2001). Sources of German Unemployment: Evidence from a Structural VAR Model, ZEW Discussion Papers.
Maidorn, S. (2003). The effects of shocks on the Austrian unemployment rate–a structural VAR approach, Empirical Economics, 28(2), 387–402. doi. 10.1007/s001810200137
Marques, C.R. (2008). Wage-Price Dynamics in Portugal’, Wage Dynamics Network: Working Paper Series, October. Paper No. 945.
McHugh, Z. (2004). A Small Macroeconometric Model of the Australian Economy: with Emphasis on Modelling Wages and Prices, PhD, Queensland University of Technology, Australia.
Morsink, J., & Bayoumi, T. (2001). A peek inside the black box: the monetary transmission mechanism in Japan, IMF Staff Papers, 48/1, 22–57.
Ngalawa, H., & Viegi, N. (2011). Dynamic effects of monetary policy shocks in Malawi, South African Journal of Economics, 79(3), 224–250. doi. 10.1111/j.1813-6982.2011.01284.x
Ngalawa, H.P.E. (2010). Essays on the Monetary Economics of Low Income Countries, University of Cape Town, Cape Town, South Africa.
Ravn, M.O., & Simonelli, S. (2007). Labour market dynamics and the business cycle: Structural evidence for the United States, The Scandinavian Journal of Economics, 109(4), 743-777. doi. 10.1111/j.1467-9442.2007.00520.x
Robalo Marques, C., Martins, F., & Portugal, P. (2010). Price and Wage Formation in Portugal, European Central Bank Working Paper Series No 1225
Sims, C. A., & Zha, T. (2006). Were there regime switches in US monetary policy? The American Economic Review, 96(1), 54-81. doi. 10.1257/000282806776157678
Sims, C.A., (1986). Are forecasting models usable for policy analysis?. Federal Reserve Bank of Minneapolis Quarterly Review, 10(1), 2-16.
Sims, C.A., Stock, J.H., & Watson, M.W. (1990). Inference in Linear Time Series Models with Some Unit Roots, Econometrica, 58(1), 113–44. doi. 10.2307/2938337
Stock, J.H., & Watson, M.W., (2001). Vector autoregressions. Journal of Economic Perspectives, 15, 101-115. doi. 10.1257/jep.15.4.101
Watzka, S. (2006). Dynamic Beveridge and Phillips curves: A macroeconometric Analysis of the US Labour Market, PhD Dissertation, European University Institute.
