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Economic growth and inflation: Determinants of unemployment in Ecuador

Abstract:

This work present an econometric model on the behavior of Unemployment in Ecuador based on the annual variations of Economic Growth and Inflation during the period (1997 to 2016). It is intended to determine what has been its impact on the Ecuadorian reality through the application of the Phillips Curve and Okun's Law. For this, the method of Ordinary Least Squares in "Gretl" (econometric software) will be used. This research was carried out through the bibliographic review based on the book of Macroeconomics by Oliver Blanchard, research's papers, and of national institutions such as the Central Bank (BCE), and the National Institute of Statistics and Census (INEC), among others. Finally, the results indicate that the best economic model that fits the Ecuadorian reality to explain Unemployment is Okun's Law, since, as the growth rates increase, unemployment tends to decrease and vice versa.