Testing Okun’s Law in Iran: New Evidence with Nonlinear ARDL Approach

Document Type : Scientific paper

Authors

Department of Economics, University of Mazandaran, Babolsar, Iran

Abstract

According to Okun’s Law in any economy, there should be a negative relationship between national output and unemployment. However, recent studies tried to improve the theory by incorporating a new econometrics approach to deal with the possible asymmetric rather than the simple linear relationship between output and unemployment. The present paper tries to estimate the impact of GDP and non-oil GDP on unemployment in Iran for the period 2001 to 2016 by quarterly data. To do so a Nonlinear ARDL model adopted to test the asymmetric hypothesis between the two variables. The paper findings support the asymmetric hypothesis in the non-oil GDP scenario which the negative growth effect on unemployment is significantly greater than the positive effect. Based on these results, hypothesis of a jobless recovery is not rejected in the Iran economy.

Keywords

References

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Macroeconomics Research Letter
Volume 14, Issue 27
November 2019
Pages 121-147

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History

  • Receive Date: 28 May 2018
  • Revise Date: 01 August 2018
  • Accept Date: 07 July 2019

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