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Modeling the relationship between GDP and unemployment for Okun’s law specific to Pakistan during 1976-2010

Author

Listed:
  • Muhammad Aamir KHAN

    (McGill University, Montreal, Canada)

  • Abdul SABOOR

    (PMAS Arid Agriculture University Rawalpindi, Pakistan)

  • Sarfraz Ahmad MIAN

    (PMAS Arid Agriculture University Rawalpindi, Pakistan)

  • Aftab ANWAR

    (PMAS Arid Agriculture University Rawalpindi, Pakistan)

Abstract

Okun’s law postulates a negative relationship between movements of the unemployment rate and the real gross domestic product (GDP). This article investigates the link between the real GDP growth and unemployment, as described by Okun’s law. For this purpose we have used time series annual data during the period 1976 to 2010 and used unit root test, Hodrick–Prescott filter and least square method to find the relationship between GDP growth and unemployment in Pakistan. The empirical analysis shows that a rise of one percentage point of unemployment is associated with a decline of 0.36 percentage point of real GDP growth.

Suggested Citation

  • Muhammad Aamir KHAN & Abdul SABOOR & Sarfraz Ahmad MIAN & Aftab ANWAR, 2013. "Modeling the relationship between GDP and unemployment for Okun’s law specific to Pakistan during 1976-2010," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(10(587)), pages 71-78, October.
    • Handle: RePEc:agr:journl:v:xx:y:2013:i:10(587):p:71-78
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    Cited by:

    1. alamro, Hassan & Al-dalaien, Qusay, 2014. "Modeling the relationship between GDP and unemployment for Okun’s law specific to Jordan," MPRA Paper 55302, University Library of Munich, Germany.
    2. Shabir Mohsin Hashmi & Ali Gul Khushik & Muhammad Akram Gilal & Zhao Yongliang, 2021. "The Impact of GDP and Its Expenditure Components on Unemployment Within BRICS Countries: Evidence of Okun’s Law From Aggregate and Disaggregated Approaches," SAGE Open, , vol. 11(2), pages 21582440211, June.

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