Is Okun’s Law Valid in Bangladesh? A Time Series Analysis

South Asia Economic Journal Pub Date : 2023-09-01 DOI:10.1177/13915614231198283

Arfanul Ibna Mustafa Sakib

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Abstract

Using the data from 1991 to 2019, this study attempts to verify Okun’s law by utilizing both ‘The difference and the dynamic versions’ of Okun’s law in Bangladesh and tries to find the value of Okun’s coefficient. The autoregressive-distribution lag (ARDL) bounds test is applied to determine the existence of a long-term relationship between the variables, and then the ordinary least squares (OLS) approach is used to estimate the findings. The findings show that Okun’s coefficient is –0.058 for the difference version of Okun’s law, which is statistically insignificant. In addition, for the dynamic version of Okun’s law, findings show that the effect of the ‘immediate past economic growth rate’ on ‘current change in the unemployment rate’ is 0.15, and it is statistically insignificant too. However, the effect of the ‘current economic growth rate’ on ‘current change in the unemployment rate’ is –0.22, and it is statistically significant at 10% significance level. In both versions of Okun’s law, R 2 values, F-statistic and cumulative sum of squares show the instability of the models. Due to statistically insignificant coefficients and model instability, it can be concluded that Okun’s law is invalid in Bangladesh. JEL Codes: E24, C22, B23, C87

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奥肯定律在孟加拉国有效吗?A时间序列分析

利用1991年至2019年的数据，本研究试图通过利用孟加拉国奥肯定律的“差异和动态版本”来验证奥肯定律，并试图找到奥肯系数的值。应用自回归分布滞后(ARDL)界检验来确定变量之间是否存在长期关系，然后使用普通最小二乘法(OLS)方法来估计结果。研究结果表明，不同版本的奥肯定律的奥肯系数为-0.058，统计学上不显著。此外，对于奥肯定律的动态版本，研究结果表明，“最近过去的经济增长率”对“当前失业率变化”的影响为0.15，并且在统计上也不显著。而“当前经济增长率”对“当前失业率变动”的影响为-0.22，且在10%显著水平下具有统计学显著性。在两种版本的奥肯定律中，r2值、f统计量和累积平方和表明了模型的不稳定性。由于统计上不显著的系数和模型不稳定，可以得出结论，奥肯定律在孟加拉国是无效的。JEL代码:E24, C22, B23, C87

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来源期刊

South Asia Economic Journal Economics, Econometrics and Finance-Economics, Econometrics and Finance (all)

CiteScore

1.10

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0.00%

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期刊介绍： The South Asian nations have progressively liberalized their economies in recent years in an effort to integrate with the world economy. They have also taken steps to enhance multilateral and regional economic integration. Even though the South Asian economies have grown at an average rate of more than 5 per cent over the last few years, roughly 40 per cent of their people still live below the poverty line. Hence, the South Asian region continues to face many challenges of economic and social development. The South Asia Economic Journal (SAEJ) is designed as a forum for informed debate on these issues, which are of vital importance to the people of the region who comprise one-sixth of the world’s population. The peer-reviewed journal is devoted to economic analysis and policy options aimed at promoting cooperation among the countries comprising South Asia. It also discusses South Asia’s position on global economic issues, its relations with other regional groupings and its response to global developments. We also welcome contributions to inter-disciplinary analysis on South Asia. As a refereed journal, SAEJ carries articles by scholars, economic commentators,policy-makers and officials, from both the private and public sectors. Our aim is to create a vibrant research space to explore the multidimensional economic issues of concern to scholars working on South Asia. Among the issues debated in relation to South Asia are: - the implications of global economic trends; - the issues and challenges by WTO; - approaches to industrialization and development; - the role of regional institutions such as the SAARC; - the relationship between SAARC and other regional economic groupings such as ASEAN; - the implications of economic liberalization for trade and investment in the region; - new initiatives that can be launched to enhance economic cooperation among the South Asian countries both on a bilateral and a regional basis.