Examining Structural Unemployment in Sub-Saharan Africa: Empirical Evidence from Unobserved Components

We apply multivariate filtering techniques to quantify structural unemployment (NAIRU), potential output, output gap and unemployment gap for South Africa, Kenya, Mauritius and Ghana. NAIRU estimates are especially relevant for these inflation-targeting or hybrid inflation-targeting economies, allowing them to assess level of domestic slack and any potential build-up of inflationary pressures. Our findings suggest that increased government spending on education, a competitive exchange rate, and boosting the level of financial development (measured as the market capitalization of listed companies) can play a role in lowering NAIRU in these Sub-Saharan African countries.