An Analysis on the Validity of Okun's Law: Case of Turkey and BRICS

Ferhat PEHLİVANOĞLU, Marvin TANGA

Özet


The relationship between economic growth and employment has always preoccupied economists and politicians. To study the relationship between, on the one hand, the evolution of economic growth and, secondly, the unemployment, economists are accustomed to refer to the "Okun's law". The main objective of this paper is to estimate the Okuns coefficient, and to check the validity of Okuns law in some emerging countries (Brazil, Russia, India, China, South Africa and Turkey) to see whether it is valid or not, using the time series annual data during the period 1990-2014. Engle granger co-integration test and Fully Modified OLS are employed. Empirical evidences show that Okuns law interpretation may not be applicable in some emerging countries. Tests of cointegration revealed long-run association between unemployment and economic growth except the case of Brazil. Our findings suggest that Okuns law is not valid for Turkey, South Africa and Brazil.

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