Lesotho's unemployment, poverty and income inequality and other social ills remain pervasive in the face of non-inclusive growth. Using structural vector autoregressive framework and annual time series data spanning from 1980 to 2014, this paper investigates the sources of the high unemployment in Lesotho, a small landlocked developing country whose currency is pegged to that of South Africa. The impulse response functions, forecast error variance decomposition and historical decomposition jointly revealed that unemployment dynamics in Lesotho largely emanate from shocks to employment, unemployment itself, productivity, real wages and inflation. The importance of positive shocks to employment and unemployment itself in explaining unemployment variations decline over time while the importance of positive shocks to productivity, real wages and inflation grow with time. In light of this, Lesotho's government should promote private sector development, diversify the economy's markets and invest in human and physical capital development with a view to increase employment.

The study empirically analyzes private consumption in Lesotho over the period 1982-2015 by employing an Autoregressive Distributed Lag bound test approach to cointegration. The results show that private consumption is positively influenced by the level of national disposable income in the short run and long run. The Marginal Propensity to Consume is highly significant and is less than 1. This proves the Keynesian consumption theory in Lesotho. The research findings reveal that increased government expenditure crowds out private consumption in the short run and long run. A growth in the level of inflation has no effect on private consumption. An expansion in the rate on deposits positively affects private consumption in the short run. The policy recommendation given the results of the study is that the government of Lesotho should implement initiatives aimed at increasing employment as well as private sector development as espoused in the country's National Strategic Development Plan.

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PurposeThis paper sets out to investigate whether the four members of the common monetary area (CMA) regime experience similar inflation-unemployment dynamics as explained by the Phillips Curve phenomenon.Design/methodology/approachThis study uses a combination of seemingly unrelated regression (SUR) and Copula based marginal regression techniques to investigate existence of a common Phillips curve (PC) between members of the CMA. Model estimation was done using country specific annual time series data for inflation, unemployment and imports spanning from 1980 to 2014.FindingsWe find evidence of contemporaneous correlation between the residuals of individual CMA PC equations and a statistically significant trade-off between inflation and unemployment for all CMA countries. Wald test results of cross-equation restrictions reveal a 9.94% chance of a common unemployment coefficient for CMA countries.Originality/valueTogether, the results of the SUR and Gaussian Copula techniques provide mixed and inconclusive evidence to support the existence of a common PC among CMA member states. This study is the first of its kind in examining this phenomenon for currency board regimes like CMA, and one of the very few among emerging market economies.