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Modeling the relationship between GDP and unemployment for Okun’s law specific to Jordan

alamro, Hassan and Al-dalaien, Qusay (2014): Modeling the relationship between GDP and unemployment for Okun’s law specific to Jordan.

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Abstract

The objective of this paper is to measure the impact of economic growth on unemployment in the Jordanian economy in the short and long-run during the period (1980-2011) by implementing the okun's law. The relationship is measured by performing the gap model with Hodrick-Prescott filter (HP filter) to calculate the potential gross domestic product.

To this end, an Autoregressive Distributed Lag (ARDL) approach to co-integration and the Error Correction Model (ECM) are employed to represent the short and long term relationship.

The results indicate that the economic growth has a weak significant negative short- and long-run effect on unemployment.

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