The Impact of the Unemployment Rate on Unemployment Benefits in Barbados: An Impulse Response Approach

The purpose of this article is to determine how the rate of unemployment will impact on unemployment benefits in Barbados using annual data from 1982 to 2009 with the use of an impulse response function. The results show that when a shock is applied to the rate of unemployment, which causes it to rise, unemployment benefits will contract marginally and this reaction will not stabilize until the 14th period when a new equilibrium will be attained. Since this new equilibrium will lie below the original equilibrium, rising unemployment will impact negatively on unemployment benefits although this decline will only be marginal.