Validity of Okun’s law : empirical evidence from Jordan

Abstract EN

The objective of this paper is to measure the impact of economic growth on unemployment in the Jordanian economy in the short and in the 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 Approach (ARDL), cointegration and the Error Correction Model (ECM) are employed to represent the short and the long term relationship.

The results indicate that the economic growth has a weak negative short- and long-run effect on unemployment