Testing the Validity of Okun’s Law in Algeria: Is there a difference between Maki’s Cointegration and Quantile’s Regression Results?
, , and | Jun 09, 2023
Published Online: Jun 09, 2023
Page range: 42 - 63
Received: Nov 09, 2022
Accepted: Feb 25, 2023
DOI: https://doi.org/10.2478/foli-2023-0003
Keywords
© 2023 Moussa Chenini et al., published by Sciendo
This work is licensed under the Creative Commons Attribution-ShareAlike 4.0 International License.
Research background
This paper examines the existence of Okun’s law in Algeria over the period of 1970–2020 using both the gap and differences model.
Purpose
The main objective of this paper is to econometrically examine, explore and test the nexus among unemployment rate and economic growth, in order to have a clear explanation about unemployment in Algeria.
Research methodology
Firstly, the Kapetanios unit root test and Maki cointegration test are employed for the gap model to deal with the structural breaks than the estimation of the coefficients in this case, secondly, the quantile regression is used for the differences model; finally, three categories of causality tests are used in this research.
Results
The findings revealed that unemployment rates are not affected by output over the period of study both in the gap and differences model. Hence, Okun’s law is not held in Algeria.
Novelty
The study focused on Okun’s law in different ways. This latter carries out structural breaks in both the unit root and co-integration analysis. On the other hand, the study uses the quantile regression for the first time in the examination of Okun’s law. In the same line of thought, this research introduces an asymmetric analysis in the Maki cointegration and quantile regression.