Test of Okun’s Law in Some Asian Countries Co-Integration Approach

Lal, Irfan; Muhammad, Sulaiman D.; Jalil, M. Anwar; Hussain, Adnan

doi:10.2139/ssrn.1562602

Test of Okun’s Law in Some Asian Countries Co-Integration Approach

European Journal of Scientific Research, Vol.40, No.1, pp.73 -80, 2010

8 Pages Posted: 8 Mar 2010 Last revised: 12 Oct 2010

See all articles by Irfan Lal

Irfan Lal

Institute of Business Management (IoBM); University of Karachi - Applied Economics Research Centre; Institute of Business Management

Sulaiman D. Muhammad

Federal Urdu University of Arts Science & Technology

Adnan Hussain

Benazir Bhutto Shaheed University, Lyari, Karachi; University of Karachi - Applied Economics Research Centre

Date Written: February 2, 2010

Abstract

The objective of this paper is to estimate the Okun’s coefficient, and to check the validity of Okun’s law in some Asian countries, whether it is valid or not, for this purpose we have used the time series annual data during the period 1980-2006. Engle Granger (1987) co integration technique is employed to find out long run association between variables and error correction mechanism (ECM) is used for short run dynamic. After getting empirical evidences it can be said that Okun’s law interpretation may not be applicable and also the principle of NAIRU does not hold its validity in some Asian developing countries. Our results have also supported to Noble Prize awarded Austrian economist Paul Krugman.

Keywords: Okun’s law, calidity, co-integration

JEL Classification: R11, R15

Suggested Citation: Suggested Citation

Lal, Irfan and Muhammad, Sulaiman D. and Jalil, M. Anwar and Hussain, Adnan, Test of Okun’s Law in Some Asian Countries Co-Integration Approach (February 2, 2010). European Journal of Scientific Research, Vol.40, No.1, pp.73 -80, 2010, Available at SSRN: https://ssrn.com/abstract=1562602 or http://dx.doi.org/10.2139/ssrn.1562602