Estimation of Okun's Law for the Venezuelan economy, 1999-2009

Abstract:

Okun's Law is a statistical relation that proposes a negative correspondence between changes in the unemployment rate and percentage changes in the real output. In recent years, the real gross domestic product of Venezuela has experienced significant variations at the same time that the data reveals a progressive decrease in the rate of unemployment. The aim of this work is to estimate Okun's Law for the Venezuelan economy during the period 1999-2009, using quarterly information and based on the available empirical evidence. This article proposes several linear equations for estimating the parameters that relate changes in the unemployment rate to percentage changes in product, following Okun's original proposal. The equations are estimated using the Ordinary Least Squares (OLS) method. For this period of study, evidence of an inverse relation between both variables is found, as the theory states; nevertheless, the coefficients are low, which could suggest that the dynamic of unemployment in Venezuela is determined by factors additional to output fluctuations.

Año de publicación:

2012

Keywords:

• Ordinary least squares
• Okun's law
• Unemployment rate
• Fluctuations
• OUTPUT

Fuente:

scopus