Journal of Finance and Economics
ISSN (Print): 2328-7284 ISSN (Online): 2328-7276 Website: http://www.sciepub.com/journal/jfe Editor-in-chief: Suman Banerjee
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Journal of Finance and Economics. 2014, 2(5), 173-177
DOI: 10.12691/jfe-2-5-7
Open AccessArticle

An Empirical Estimation of Okun’S Law in Context of Pakistan

Misbah Akram1, , Shahzad Hussain2, Syed Hasan Raza1 and Saqib Masood3

1National University Of Modern Languages Faisalabad Campus, Pakistan

2National Defence University Islamabad, Pakistan

3Sodertorn University Sweden

Pub. Date: August 21, 2014

Cite this paper:
Misbah Akram, Shahzad Hussain, Syed Hasan Raza and Saqib Masood. An Empirical Estimation of Okun’S Law in Context of Pakistan. Journal of Finance and Economics. 2014; 2(5):173-177. doi: 10.12691/jfe-2-5-7

Abstract

This research work is on the topic of an empirical estimation of Okun’s law in context of Pakistan. Coefficient of Okun’s law is estimated to check whether this law exist in Pakistan’s economy or not. Okun’s law shows three to one link between real GDP and rate of unemployment. Time series data of real GDP and rate of unemployment of Pakistan have been used to find the validity of Okun’s law. Duration of data is 1972 - 2012. Different three versions of Okun’s law gap version, difference version and dynamic version are used to calculate the Okun’s coefficient. Ordinary least square method is applied for analysis. The empirical results show that there is no existence of Okun’s law in Pakistan’s economy. Coefficients estimated by using all the three versions are very small and reject the presence of this law in Pakistan.

Keywords:
Okun’s law gap version difference version dynamic version GDP unemployment potential output natural rate of unemployment OLS

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