<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>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.</p>
</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.

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

ECONOMICS

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

{"article-title":"Analysis of Okun\u2019s Regularity: The Case of Bosnia and Herzegovina"}

Economic growth, or, more precisely, GDP growth rate (Y) is the key macroeconomic indicator. Positive tendencies of GDP growth (r) mostly impact the economic...

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

Published Online: Dec 31, 2020

Page range: 139 - 147

Received: Oct 31, 2020

Accepted: Nov 18, 2020

DOI: https://doi.org/10.2478/eoik-2020-0011

Keywords
unemployment, GDP, Okun’s law, Bosnia and Herzegovina

© 2020 Ognjen Erić et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

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

Published Online: Dec 31, 2020

Page range: 139 - 147

Received: Oct 31, 2020

Accepted: Nov 18, 2020

DOI: https://doi.org/10.2478/eoik-2020-0011

Keywordsunemployment, GDP, Okun’s law, Bosnia and Herzegovina

© 2020 Ognjen Erić et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Keywords
unemployment, GDP, Okun’s law, Bosnia and Herzegovina