1. bookVolume 8 (2020): Issue 2 (December 2020)
Journal Details
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First Published
08 Sep 2015
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2 times per year
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English
access type Open Access

Analysis of Okun’s Regularity: The Case of Bosnia and Herzegovina

Published Online: 31 Dec 2020
Page range: 139 - 147
Received: 31 Oct 2020
Accepted: 18 Nov 2020
Journal Details
License
Format
Journal
First Published
08 Sep 2015
Publication timeframe
2 times per year
Languages
English
Abstract

Economic growth, or, more precisely, GDP growth rate (Y) is the key macroeconomic indicator. Positive tendencies of GDP growth (r) mostly impact the economic welfare of the national economy. Hence, output is analysed in combination with other macroeconomic aggregates and indicators: investments, inflation, unemployment, trade exchange and the like. In the context of researching the relation between GDP trends and unemployment rate, A.M. Okun was the first to notice regularity between these variables. Okun’s law shows the direction and strength of GDP changes under the influence of (un)employment and represents functional relation between the output market and labour market. This paper aims to prove that, to a certain extent, there exists Okun’s regularity in Bosnian and Herzegovinian economy for the period of 2000-2019. The results of linear regression analysis show that there is negative correlation (R=0,451) between variables Y (output) and X (unemployment). Determination coefficient R2 = 0,204 indicates that 20,4% variations in GDP is determined by the changes in unemployment. Coefficient β in linear regression equation is negative, amounting to -0,596, which means that a change in unemployment by 1 percentile point brings about an inverse change in GDP by approximately 0,6 units. Variable direction indicates that there exists Okun’s regularity, though with significantly weaker intensity among the variables. This proves the hypothesis that there is a negative functional relation between the output market and labour market in Bosnia and Herzegovina.

Keywords

JEL Classification

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