Abstract:
The main purpose of the research was to establish the sources of
unemployment in Namibia for the period 1980 to 2013 using the SVAR
methodology. Empirical results show that persistently high unemployment is
the result of a combination of various shocks as well as the hysteresis
mechanism. The impulse response functions and variance decomposition
functions agree that labour supply, aggregate demand, and real wages seem to
be the critical factors affecting unemployment. Moreover, the price shocks
affect unemployment in the long run and productivity shocks explain only a
small fraction of the forecast error variance decomposition of unemployment
in both the short run and long run. This finding is consistent with the
controversy of uncertain effects of productivity shocks on the unemployment
rate. Aggregate demand policies, deregulation policies and structural labour
market reforms can be useful policy instruments to tackle unemployment in
Namibia.
