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Test of Okun’s Law in Some Asian Countries Co-Integration Approach

Author

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  • Lal, Irfan
  • Mohammad, Sulaiman D.
  • Hussain, Adnan
  • Jalil, Anwar

Abstract

The objective of this paper is to estimate the Okun’s coefficient, and to check the validity of Okun’s law in some Asian countries1 whether it is valid or not, for this purpose we have used the time series annual data during the period 1980-2006. Engle Granger's (1987) co-integration technique is employed to find out the long run association between variables and an error correction mechanism (ECM) is used for short run dynamic. After getting empirical evidence it can be said that Okun’s law interpretation may not be applicable and also the principle of NAIRU does not hold its validity in some Asian developing countries. Our results have also supported to Noble Prize awarded economist Paul Krugman.

Suggested Citation

  • Lal, Irfan & Mohammad, Sulaiman D. & Hussain, Adnan & Jalil, Anwar, 2012. "Test of Okun’s Law in Some Asian Countries Co-Integration Approach," MPRA Paper 106934, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:106934
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    References listed on IDEAS

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    1. Nicholas Apergis & Anthony Rezitis, 2003. "An examination of Okun's law: evidence from regional areas in Greece," Applied Economics, Taylor & Francis Journals, vol. 35(10), pages 1147-1151.
    2. Engelbert Stockhammer, 2004. "Is there an equilibrium rate of unemployment in the long run?," Review of Political Economy, Taylor & Francis Journals, vol. 16(1), pages 59-77.
    3. Donald Freeman, 2000. "Regional tests of Okun's law," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 6(3), pages 557-570, August.
    4. Ho-Chuan Huang & Shu-Chin Lin, 2006. "A flexible nonlinear inference to Okun's relationship," Applied Economics Letters, Taylor & Francis Journals, vol. 13(5), pages 325-331.
    5. Dany Lang & Christian de Peretti, 2009. "A strong hysteretic model of Okun's Law: theory and a preliminary investigation," International Review of Applied Economics, Taylor & Francis Journals, vol. 23(4), pages 445-462.
    6. Hubert Gabrisch & Herbert Buscher, 2006. "The Relationship between Unemployment and Output in Post-communist Countries," Post-Communist Economies, Taylor & Francis Journals, vol. 18(3), pages 261-276.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Okun’s law; Validity; cointegration;
    All these keywords.

    JEL classification:

    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
    • C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts

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