Validation of Okun’s Law in Pakistan

IJPSS Vol. 5, Issue 5

9 Pages Posted: 8 May 2015

See all articles by Muhammad Zahir Faridi

Muhammad Zahir Faridi

Bahauddin Zakarya University Multan

Sajid Ali

Government College, Multan

Dr. Furrukh Bashir

University of the Punjab (PU) - Department of Economics; The Islamia University of Bahawalpur, Pakistan

Date Written: May 1, 2015

Abstract

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

Suggested Citation

Faridi, Muhammad Zahir and Ali, Sajid and Bashir, Furrukh, Validation of Okun’s Law in Pakistan (May 1, 2015). IJPSS Vol. 5, Issue 5, Available at SSRN: https://ssrn.com/abstract=2603670

Muhammad Zahir Faridi (Contact Author)

Bahauddin Zakarya University Multan ( email )

Bosan Road
Multan, PA Punjab 60800
Pakistan

Sajid Ali

Government College, Multan ( email )

Bosan Road, Multan, Pakistan.
Multan, Punjab
Pakistan

Furrukh Bashir

University of the Punjab (PU) - Department of Economics ( email )

Lahore
Pakistan

The Islamia University of Bahawalpur, Pakistan ( email )

Bahawalpur, Punjab 63100
Pakistan

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