Okun’s Law and Long Term Co-Integration Analysis for OECD Countries (1987-2012)

MPRA Paper from University Library of Munich, Germany

Abstract: Even though, there are so many so long discussions on the relation between population increase and economic growth, today, general opinion tends to believe that there is a direct relation between population increase and economic growth. This opinion is supported by some empirical studies. Despite an economical growth caused by directly with population growth, it is known that there is a reverse relation between unemployment and growth known as Okun’s Law. This relation, suggesting that every 1 point decrease in unemployment induces a 3 point increase in growth, is tested for many countries. In this study, this hypothesis of Okun is examined and it is found to be true for selected 23 countries, even with the difference in coefficients. At the same time, long term relation between growth and unemployment is tested with the use of time series analysis and long term relation is found for 14 countries. Additionally, tests done for all 34 OECD countries showed that reversed relation between unemployment and growth is valid and they are co-integrated in long run. In this study, countries are categorized according to growth rate as “low”, “normal” and “high” and a consistent unemployment rate for countries with high growth rate could not be seen. In the case of countries with lowest growth rate, generalization that they have quite high unemployment rate can be made.

Keywords: Economic Growth; OECD; Unemployment. (search for similar items in EconPapers)
JEL-codes: J64 O40 O57 (search for similar items in EconPapers)
Date: 2013-10
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Published in International Research Journal of Finance and Economics 119 (2014): pp. 77-85

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/55700/1/MPRA_paper_55700.pdf original version (application/pdf)

Related works:
Journal Article: Okun’s Law and Long Term Co-Integration Analysis for OECD Countries (1987-2012) (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:55700

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().