Validation of Okun’s Law in Pakistan
IJPSS Vol. 5, Issue 5
9 Pages Posted: 8 May 2015
Date Written: May 1, 2015
This paper critically analyzes the effect of GDP on unemployment level i.e. the validation of Okun’s Law in Pakistan. Annual data for the period 1974-2014 is taken from Economic Survey of Pakistan. The study revealed that GDP is negatively related to unemployment. The negative effect of GDP on unemployment is low, implies that other factors like lose employment policies and non availability of professional skills retard the employment generating capacity of GDP growth rate. This study uses Augmented Dickey Fuller (1981) Test to test unit root problem. The study concludes that increase in GDP significantly decreases unemployment in the long-run.
Keywords: GDP; GDP Growth; Unemployment; ARDL
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