Testing Okun’s Law: Evidence from the Western Balkan Countries

Session

Political Science

Description

Sustainable economic growth and reducing the unemployment rate stood at the heart of each economic policy. Despite controversial discussions among scholars, Okun’s Law remains a valid tool for measuring the relationship between economic growth and the unemployment rate. The study covers the six Western Balkan (WB) countries using quarterly data on unemployment and economic growth from 2005 to 2019. The Ordinary Least Square, Vector Autoregressive Model, Granger Causality Test, and Impulse Response Function were used to obtain the results. The findings show that GDP has no influence on the unemployment rate in the case of six Western Balkan countries. From the policy perspective, the outcomes of this study provide valuable indications for the policymakers in WB countries on the importance of economic growth in reducing the unemployment rate.

Keywords:

unemployment rate, economic growth, Okun’s Law, Western Balkan countries.

Proceedings Editor

Edmond Hajrizi

ISBN

978-9951-550-47-5

Location

UBT Kampus, Lipjan

Start Date

30-10-2021 12:00 AM

End Date

30-10-2021 12:00 AM

DOI

10.33107/ubt-ic.2021.253

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Oct 30th, 12:00 AM Oct 30th, 12:00 AM

Testing Okun’s Law: Evidence from the Western Balkan Countries

UBT Kampus, Lipjan

Sustainable economic growth and reducing the unemployment rate stood at the heart of each economic policy. Despite controversial discussions among scholars, Okun’s Law remains a valid tool for measuring the relationship between economic growth and the unemployment rate. The study covers the six Western Balkan (WB) countries using quarterly data on unemployment and economic growth from 2005 to 2019. The Ordinary Least Square, Vector Autoregressive Model, Granger Causality Test, and Impulse Response Function were used to obtain the results. The findings show that GDP has no influence on the unemployment rate in the case of six Western Balkan countries. From the policy perspective, the outcomes of this study provide valuable indications for the policymakers in WB countries on the importance of economic growth in reducing the unemployment rate.