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The validity of Okun’s Law: Evidences from Indian economy

Author

Listed:
  • Tariq Ahmad BHAT

    (Vikram University Ujjain (M.P.), India)

  • Tariq Ahmad LONE

    (Aligrah Muslim University (U.P.), India)

  • Towseef Mohi Ud DIN

    (Vikram University Ujjain (M.P.), India)

Abstract

Unemployment is one of the most prominent issues being faced by developing countries especially India. Unemployment means productive resources not being utilized at all, which results low growth rate in real GDP. In macroeconomic terminology this relationship is called as Okun’s Law. The main aim of this paper is to examine whether there exists an Okun type relationship in Indian economy or not. Empirical result shows negative and significant effect of growth upon unemployment rate. Our model suggests that 1% increase in GDP will decrease unemployment rate by 0.4 percentage point.

Suggested Citation

  • Tariq Ahmad BHAT & Tariq Ahmad LONE & Towseef Mohi Ud DIN, 2019. "The validity of Okun’s Law: Evidences from Indian economy," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(4(621), W), pages 273-278, Winter.
    • Handle: RePEc:agr:journl:v:xxvi:y:2019:i:4(621):p:273-278
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    References listed on IDEAS

    as
    1. Lee, Jim, 2000. "The Robustness of Okun's Law: Evidence from OECD Countries," Journal of Macroeconomics, Elsevier, vol. 22(2), pages 331-356, April.
    2. Brian Silverstone & Richard Harris, 2001. "Testing for asymmetry in Okun's law: A cross-country comparison," Economics Bulletin, AccessEcon, vol. 5(2), pages 1-13.
    3. Attfield, Clifford L. F. & Silverstone, Brian, 1998. "Okun's Law, Cointegration and Gap Variables," Journal of Macroeconomics, Elsevier, vol. 20(3), pages 625-637, July.
    4. Edward S. Knotek, 2007. "How useful is Okun's law?," Economic Review, Federal Reserve Bank of Kansas City, vol. 92(Q IV), pages 73-103.
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