Okun’s law in an emerging country: An empirical analysis in Indonesia

Lee, Cheng-Wen; Huruta, Andrian Dolfriandra

doi:10.15678/ier.2019.0504.09

Cited by 3 publications

(4 citation statements)

References 33 publications

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“…It was common in developing countries such as Indonesia to be capital intensive (Lee & Huruta, 2019). Employers in developing countries were high profit-oriented by using existing technologies and reducing the number of employees they needed.…”

Section: Discussionmentioning

confidence: 99%

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Reexamination of Okun's law: Empirical analysis from Panel Granger Causality

Sasongko¹,

Putri²,

Huruta³

et al. 2020

Industrija

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This study aims to confirm the existence of Okun's coefficients in Indonesia. Authors conducted panel data of 34 provinces in Indonesia for the period from 2014 to 2019, obtained from the Central Bureau of Statistics. The data were analyzed by using the panel data model and Panel Granger Causality. The Panel Granger causality analysis results show that there was one-way causality between the economic growth and the unemployment. It was caused by several influencing factors, such as education level, population, and employment opportunities. Based on the Fixed Effect Model and Panel Granger Causality results, authors conclude that Okun's Law has not been proven for 34 provinces in Indonesia.

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Section: Discussionmentioning

confidence: 99%

“…Meanwhile, Lee and Huruta (2019) find that the open unemployment rate does Granger cause gross domestic product, but not vice versa. In line with the Structural Vector Auto-regression, there is a negative relationship between GDP and the open unemployment rate.…”

Section: Literature Reviewmentioning

confidence: 96%

Reexamination of Okun's law: Empirical analysis from Panel Granger Causality

Sasongko¹,

Putri²,

Huruta³

et al. 2020

Industrija

Self Cite

View full text Add to dashboard Cite

show abstract

“…change in the unemployment rate. By many researchers, the above relationship with the confidence interval taken into account has been empirically confirmed on the example of other economies (Lee & Huruta, 2019), sometimes examining the above relationship with extended vector-autoregression models (Pata et al, 2018).…”

Section: Introductionmentioning

confidence: 88%

Application of the vector-autoregression VAR model in the analysis of unemployment hysteresis in the context of Okun’s Law

Kołbyko

2023

REF

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Unemployment is an important macroeconomic issue both in theoretical terms and for economic reality. On the theoretical ground, the unemployment rate, which is a measure of the share of unemployed units of the labour supply in the economy, determines the output gap at a certain adjustment parameter determined by the marginal productivity of labour. One of the causes of rising or persistent unemployment in the economy is the phenomenon of unemployment hysteresis, which occurs as a result of changes in the marginal disutility of labour, the strength of the wage bargain and other exogenous conditions arising in previous periods. The purpose of the study conducted in the following paper is to investigate the phenomenon of hysteresis in the labour market by analysing the significance of the impact of the unemployment rate in previous periods. In addition, the work aims to study Okun’s Law as an effect of production dynamics on the unemployment rate. The study of the dependence was carried out through the estimation of a macroeconometric time series model—vector-autoregression (VAR) on the example of statistical data for Poland obtained from Statistics Poland (Stat.gov.pl) and complied raports about national accounts in the quarterly sequence for the years 2015–2021.

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“…In Eastern European Countries, Soylu et al (2018) investigated the relationship between economic growth and unemployment and found that economic growth positively affects unemployment. In Indonesia, Lee and Huruta (2019) use the Granger causality test to suggest that the open unemployment rate causes Granger in the GDP, but not vice versa. Consistent with structural vector autoregression, a negative relationship existed between GDP and the open unemployment rate.…”

Section: Economic Growth and Inflation In Africamentioning

confidence: 99%

Economic growth, inflation and unemployment in Africa: an autoregressive distributed lag bounds testing approach, 1991–2019

Gómez

Irewole

2023

AJEMS

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PurposeUnemployment is one of the major challenges facing most countries, including Africa as a continent. Seeking how to reduce unemployment, debt, inflation and increase gross domestic product (GDP), foreign direct investment (FDI) and gross capital formation in the continent has been an agenda of governments, policy makers and economists to. This study examines the relationship between economic growth, inflation, debt, FDI, gross capital formation, labor force, population and unemployment in Africa.Design/methodology/approachAn updated panel dataset of 29 African countries was selected from different regions from 1991 to 2019. These countries were selected based on their unemployment, population growth and inflation rates. The Pesaran cross-sectional dependence and panel unit root test (the Dickey–Fuller cross-sectional supplemented and the Im-Pesaran-Shin cross-sectional) were applied. Further, the panel Autoregressive Distributed Lag (ARDL) model (Bounds test) and pooled mean group (PMG) estimator were utilized in this work.FindingsThis shows that economic growth, debt, labor force and population have a positive relationship with unemployment in the long run. Therefore, an increase in these variables generates an increase in the selected African countries' unemployment growth. In contrast, inflation, FDI and gross capital formation have a negative relationship with unemployment in the long run, which implies that an increase in these variables reduces unemployment in the selected African countries.Research limitations/implicationsThis study has potential limitations because some data from the countries are not up to date and some years are missing from the data.Practical implicationsThis study contributes to understanding unemployment and Okun's law in the African economy. This study shows that an increase in economic growth leads to a rise in unemployment, while an increase in inflation leads to a decrease in unemployment.Originality/valueThis paper provides an insight into the major factors that increase and reduces unemployment for government and policy marker to take the adequate measure.

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Okun’s law in an emerging country: An empirical analysis in Indonesia

Cited by 3 publications

References 33 publications

Reexamination of Okun's law: Empirical analysis from Panel Granger Causality

Reexamination of Okun's law: Empirical analysis from Panel Granger Causality

Application of the vector-autoregression VAR model in the analysis of unemployment hysteresis in the context of Okun’s Law

Economic growth, inflation and unemployment in Africa: an autoregressive distributed lag bounds testing approach, 1991–2019

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