Asymmetric Effect of GDP on Unemployment in North African Group Countries According to Okun's Law
DOI:
https://doi.org/10.57125/FEL.2025.03.25.01Keywords:
Okun's law, unemployment rate, GDP, inflation rate, ARDLAbstract
The purpose of this work is to study Okun's law in a sample of North African economies (Algeria, Tunisia, Morocco, Libya, and Egypt) by examining the impact of the output gap on the unemployment gap and contributing to economic growth to reduce unemployment. These investigations aim to fill a significant gap in the empirical literature on the motives of Okun law in developing countries in general and North African countries in particular. The panel nonlinear ARDL model was used to examine the presence of Okun's law in North African economies over the period 1991-2023. The results of testing Okun's law in the sample of selected countries showed that Okun's law is valid for North African countries but in smaller amounts than those reached by Okun (between -2 and -3). Algeria recorded the highest value of -0.36. In addition, it was noted that the negative impact of GDP on unemployment rates is more significant than the positive impact in all the countries under study and is more critical in the cases of Algeria and Egypt. The study recommends prioritising economic growth through investments in labour-intensive sectors such as agriculture and industry, reducing bureaucratic inefficiencies, combating corruption, and fostering a favourable investment climate. Moreover, actions that can be taken involve improving training initiatives and implementing policies that promote the sector to stimulate the growth of stable employment opportunities. As a result, these empirical research findings regarding Okun’s Law are essential in shaping nations' economies and offer actionable suggestions for policymakers.
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