Asymmetric Equilibrium Adjustment between Employment and Economic Growth in Côte d’Ivoire: A Consistent Momentum Threshold Autoregressive Model

Asymmetric Equilibrium Adjustment between Employment and Economic Growth in Côte d’Ivoire: A Consistent Momentum Threshold Autoregressive Model

Coffie Francis José N’Guessan (Université Félix Houphouët-Boigny, Côte d’Ivoire)
Copyright: © 2014 |Pages: 9
DOI: 10.4018/978-1-4666-4329-1.ch001
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Abstract

In this chapter, the author investigate the possibility of asymmetry in the relationship between employment in the modern private sector and economic growth as measured by real Gross Domestic Product (GDP). The analysis is based on a threshold cointegration model. The use of a momentum threshold autoregressive model led to the rejection of the hypothesis of no cointegration, implying that the cointegration relationship between employment and real GDP is asymmetric. The error correction model developed thereafter suggests that in the short-run, when employment is above its long-term trend, the disequilibrium is adjusted via a decreasing of real GDP. However, it seems like adjustment does not occur when employment is below its equilibrium value. This indicates that restrictive macroeconomic policies that affect the labor market can lead to a persistent employment crisis in the modern private sector.
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2. Econometric Methodology

To examine the relationship between employment and growth of GDP, our methodology starts with the linkage between employment and output, another version of the Okun law(see: Boltho and Glyn, 1995; Padalino and Vivareli, 1997; Islam and Nazara, 2000).

(1)

is the logarithm of the persons employed and the logarithm of real output, is a random error term, and and denote parameters.

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