Econometric Analysis of Jobless Recovery in Latin America

As one of the critical factors of economic growth, unemployment is often studied with the aim of better understanding its dynamics and being able to create control measures that will shine during periods of stress. For the most part, it would be believed that as soon as a country's economic health shows positive signs, unemployment should perform along these lines. However, the reality is that a financial crisis is always accompanied by structural change, which not only leads to a redistribution of labour but demands training of the economically active population to fill these new positions. This phenomenon is explained under the concept of “Jobless Recovery.” While the relationship between factors has been studied multiple times in North American countries, there is still much to discover in the scope of Latin American nations. The present study covers 18 Latin American countries, considering annual data between 1991 and 2021. The introduction provides an overview of the topic and literature covering key concepts such as economic cycles and Jobless recovery. In the analysis part, the relationship between GDP per capita and the Unemployment rate will be studied using a panel vector autoregression. The paper aims to explore if the relationship evidenced for North American countries is also valid and applicable to the countries in the area of study. All the data for the present analysis has been retrieved from the World Bank database.