INVESTIGATING THE EXISTENCE OF THE OKUN’S LAW IN NORTH MACEDONIA
Research Article
INVESTIGATING THE EXISTENCE OF THE OKUN’S LAW IN NORTH MACEDONIA
ABSTRACT
Unemployment is one of the most prominent issues being faced by developing countries such as North Macedonia. Unemployment indicates that productive resources are not being used properly, resulting in a low rate of real GDP growth. In macroeconomics, this relationship is known as the Okun's Law. The main aim of this study is to empirically examine and test the relationship between the unemployment rate and economic growth within the Macedonian economy over the period (1991-2019) using secondary data collected from the World Bank database. To examine the validity of Okun’s law, which suggests a negative relationship between the unemployment rate and economic growth, The Auto-regression Distributed Lags Model is employed. The econometric analysis suggests that there is a statistically significant long-run relationship between the GDP growth and total unemployment in North Macedonia, at the 10% level of probability. In particular, the findings show that a 1% increase in the total unemployment will lead to a decrease of the GDP growth of 8.02%. This relationship in the opposite direction does not correspond since GDP growth affects total unemployment only in the short-term, with a positive sign, which is not in line with Okun’s law. No long-run relationship between GDP growth and youth unemployment was detected as well, only positive short-term relationships.
VELICHKOVSKA, K.,
(2021). INVESTIGATING THE EXISTENCE OF THE OKUN’S LAW IN NORTH MACEDONIA. Trends in Economics, Finance, and Management Journal, 3(2), 52-60. Arrival Date Posted By:https://tefmj.ibupress.com/articles/investigating-the-existence-of-the-okun-s-law-in-north-macedonia
