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A Research on the Relationship between the Real Aggregate Output and the Unemployment Rate in Bulgaria

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  • Milen V. Velev

Abstract

This study examined the causal and quantitative relationships between the real aggregate output and the unemployment rate in Bulgaria. A review of the main theoretical concepts has been made, explaining relationships between inflation and unemployment, natural rate of unemployment and potential output, which are important indicators of macroeconomic equilibrium and stability. By comparison between the unemployment rate and inflation, it is estimated the natural rate of unemployment and the potential output in Bulgaria. The specific quantitative relationship between the real aggregate output and the unemployment rate in Bulgaria has been estimated and analyzed, by econometric models that are based on the Okun's law, expressed in gap and difference form. The paper discusses some of the factors that affect the value of the Okun's coefficient – the hysteresis effect, the growth of the labor force and the productivity of the labor force, the share of the shadow economy, the changes in the structure of unemployment by level of education and occupation, the seasonal factor, etc.

Suggested Citation

  • Milen V. Velev, 2014. "A Research on the Relationship between the Real Aggregate Output and the Unemployment Rate in Bulgaria," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 58-91.
    • Handle: RePEc:bas:econst:y:2014:i:3:p:58-91
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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