Modeling the Relationship between GDP and Unemployment for Okun's Law Specific to Jordan
16 Pages Posted: 24 May 2014 Last revised: 5 Aug 2014
Date Written: April 13, 2014
The objective of this paper is to measure the impact of economic growth on unemployment in the Jordanian economy in the short and long-run during the period (1980-2011) by implementing the Okun's law. The relationship is measured by performing the gap model with Hodrick-Prescott filter (HP filter) to calculate the potential gross domestic product. To this end, an Autoregressive Distributed Lag (ARDL) approach to co-integration and the Error Correction Model (ECM) are employed to represent the short and long term relationship. The results indicate that the economic growth has a weak significant negative short- and long-run effect on unemployment.
Keywords: unemployment, Okun's law, gap model, Autoregressive Distributed Lag (ARDL) approach, co-integration, Error Correction Model
JEL Classification: E, E2, E24, J, J0, J01
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