The Validity of Okun’s Law in North Macedonia

Abstract

This paper investigates the relationship between unemployment rates (youth and total) and GDP growth in North Macedonia, within the context of Okun’s Law. The econometric analysis of the paper is based on The Auto-regression Distributed Lags Model, using data for the period 1991-2017 collected from different data basis. The econometric analysis suggests that there is a statistically significant long-run relationship between the GDP growth and total unemployment in North Macedonia, at the 1% level of probability. In particular, the findings show that a 1% increase in the economic growth will lead to decrease of the total unemployment for 2.57%. No short- or long-run relationship between GDP growth and youth unemployment was detected.