1 ROBUST ESTIMATES OF OKUN’S COEFFICIENT FOR

of the definition used to measure the size of the labour force as well as the number of unemployed. Combating unemployment is one of the corner stones upon which the government’s Accelerated and Shared Growth Initiative – South Africa (ASGISA) is built. The ASGISA objectives are to halve poverty and unemployment (rates) by 2014 and to achieve these objectives, government posits that the average annual GDP growth rate between 2004 and 2014 should be 5%. Okun’s law states that an inverse relationship exists between cyclical output and cyclical unemployment. Given the importance attached to sustained, increased economic growth in addressing unemployment in policy circles, this paper estimates the relationship between economic activity (cyclical GDP) and changes in the unemployment rate (cyclical unemployment) for South Africa. A variety of detrending methods are used to decompose output and unemployment series into their trend and cyclical components and the paper also addresses the question of asymmetries in Okun’s coefficient. The results indicate the presence of an Okun’s law relationship in South Africa over the period 1970-2005 with some evidence of asymmetries