International journal of

ADVANCED AND APPLIED SCIENCES

EISSN: 2313-3724, Print ISSN:2313-626X

Frequency: 12
line decor
  
line decor

 Volume 6, Issue 10 (October 2019), Pages: 83-88

----------------------------------------------

 Original Research Paper

 Title: Asymmetry relationship between economic growth and unemployment rates in the Saudi economy: Application of Okun’s law during the period 1991–2017

 Author(s): Bilal Louail *, Siham Riache

 Affiliation(s):

 College of Business Administration, Northern Border University, Arar, Saudi Arabia

  Full Text - PDF          XML

 * Corresponding Author. 

  Corresponding author's ORCID profile: https://orcid.org/0000-0002-2383-4329

 Digital Object Identifier: 

 https://doi.org/10.21833/ijaas.2019.10.013

 Abstract:

The purpose of this paper is to examine Okun’s law in the Saudi economy by examining the impact of the OUTPUT gap on the unemployment rates’ gap, and the contribution of economic growth to reducing unemployment. This investigation intends to fill a major gap regarding empirical literature on OKUN law drivers in developing countries in general and Arab countries in particular. The autoregressive distributed lag bounds testing technique is used to examine the existence of Okun’s law in the Saudi Economy during 1991–2017. The empirical results reveal the existence of Okun’s law in the Saudi economy. Coefficients estimated by using the Gap Version and concluded that there was a negative and significant impact of the gross domestic product gap on unemployment rates, with a 1% increase in Gross Domestic Product being correlated with a 0.29% decrease in the unemployment rate. This research aims to fill a gap by using the Okun coefficient to study the effect of increasing economic growth rates on unemployment rates in the Saudi economy during 1991–2017. 

 © 2019 The Authors. Published by IASE.

 This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).

 Keywords: Unemployment rate, Gross domestic product, Okun’s law, Saudi economy

 Article History: Received 1 May 2019, Received in revised form 8 August 2019, Accepted 10 August 2019

 Acknowledgement:

The authors gratefully acknowledge the approval and support of the deanship of the scientific research study (grant no. BA-2018-3-9-F-5968) at the Northern Border University, Arar, Kingdom of Saudi Arabia.

 Compliance with ethical standards

 Conflict of interest:  The authors declare that they have no conflict of interest.

 Citation:

 Louail B and Riache S (2019). Asymmetry relationship between economic growth and unemployment rates in the Saudi economy: Application of Okun’s law during the period 1991–2017. International Journal of Advanced and Applied Sciences, 6(10): 83-88

 Permanent Link to this page

 Figures

 Fig. 1 Fig. 2

 Tables

 Table 1 Table 2 Table 3 Table 4 Table 5 Table 6 Table 7 Table 8

----------------------------------------------

 References (23) 

  1. Abu N (2017). Does Okun’s law exist in Nigeria? Evidence from the ARDL bounds testing approach. Contemporary Economics, 11(2): 131-144. https://doi.org/10.5709/ce.1897-9254.232   [Google Scholar]
  2. Adanu K (2005). A cross-province comparison of Okun's coefficient for Canada. Applied Economics, 37(5): 561-570. https://doi.org/10.1080/0003684042000201848   [Google Scholar]
  3. Akram M, Hussain S, Raza SH, and Masood S (2014). An empirical estimation of Okun’s law in context of Pakistan. Journal of Finance and Economics, 2(5): 173-177. https://doi.org/10.12691/jfe-2-5-7   [Google Scholar]
  4. Alrasheedy A (2017). Monetary policies for full employment and price stability in Saudi Arabia: An endogenous money approach. Ph.D. Dissertation, University of Missouri, Kansas, USA.   [Google Scholar]
  5. Apergis N and Rezitis A (2003). An examination of Okun's law: Evidence from regional areas in Greece. Applied Economics, 35(10): 1147-1151. https://doi.org/10.1080/0003684032000066787   [Google Scholar]
  6. Ball L, Jalles JT, and Loungani P (2015). Do forecasters believe in Okun’s Law? An assessment of unemployment and output forecasts. International Journal of Forecasting, 31(1): 176-184. https://doi.org/10.1016/j.ijforecast.2014.03.009   [Google Scholar]
  7. Bartolucci F, Choudhry MT, Marelli E, and Signorelli M (2011). Financial crises and unemployment: Beyond the Okun’s law. In the WP 16th World Congress of the International Economic Association, Tsinghua University, Beijing, China.   [Google Scholar]
  8. Ben-Salha O and Mrabet Z (2019). Is economic growth really jobless? Empirical evidence from North Africa. Comparative Economic Studies Journal: 1-27. https://doi.org/10.1057/s41294-018-00082-9   [Google Scholar]
  9. Binet ME and Facchini F (2013). Okun's law in the French regions: A cross-regional comparison. Economics Bulletin, 33(1): 420-433.   [Google Scholar]
  10. Driouche D (2013). Economic growth and unemployment in Algeria: An econometric study. An-Najah University Journal for Research-Humanities, 27(3): 1294-1322.   [Google Scholar]
  11. Durech R, Minea A, Mustea L, and Slusna L (2014). Regional evidence on Okun's law in Czech Republic and Slovakia. Economic Modelling, 42: 57-65. https://doi.org/10.1016/j.econmod.2014.05.039   [Google Scholar]
  12. Economou A and Psarianos IN (2016). Revisiting Okun’s law in European Union countries. Journal of Economic Studies, 43(2): 275-287. https://doi.org/10.1108/JES-05-2013-0063   [Google Scholar]
  13. GAS (2018). Consumer price index. General Authority for Statistics. Riyadh, Saudi Arabia. Available online at: https://bit.ly/2DRvgxy
  14. Guisinger AY, Hernandez-Murillo R, Owyang MT, and Sinclair TM (2018). A state-level analysis of Okun's law. Regional Science and Urban Economics, 68: 239-248. https://doi.org/10.1016/j.regsciurbeco.2017.11.005   [Google Scholar]
  15. Jouili TA and Khemissi FM (2019). Impact of economic diversification on graduates' employment. International Journal of Advanced and Applied Sciences, 6(3): 35-39. https://doi.org/10.21833/ijaas.2019.03.006   [Google Scholar]
  16. Knotek II ES (2007). How useful is Okun's law? Economic Review-Federal Reserve Bank of Kansas City, 92(4): 73-103.   [Google Scholar]
  17. Maria JR, Jose FV, and Saura D (2008). Unemployment and economic growth cycles. Studies in Nonlinear Dynamics and Econometrics, 12(2): 1-19. https://doi.org/10.2202/1558-3708.1559   [Google Scholar]
  18. Okun AM (1962). Potential GNP: Its measurement and significance. In the Proceedings of the Business and Economics Statistics Section of the American Statistical Association, Alexandria, USA: 98-104.   [Google Scholar]
  19. Pesaran MH, Shin Y, and Smith RP (1999). Pooled mean group estimation of dynamic heterogeneous panels. Journal of the American Statistical Association, 94(446): 621-634. https://doi.org/10.1080/01621459.1999.10474156   [Google Scholar]
  20. Prachowny MF (1993). Okun's law: Theoretical foundations and revised estimates. The review of Economics and Statistics, 75(2): 331-336. https://doi.org/10.2307/2109440   [Google Scholar]
  21. Ting NY and Ling LS (2011). Okun’s law in Malaysia: An autoregressive distributed lag (ARDL) approach with Hodrick–Prescott (HP) filter. Journal of Global Business and Economics, 2(1): 95-103.   [Google Scholar]
  22. Valadkhani A and Smyth R (2015). Switching and asymmetric behaviour of the Okun coefficient in the US: Evidence for the 1948–2015 period. Economic Modelling, 50: 281-290. https://doi.org/10.1016/j.econmod.2015.07.001   [Google Scholar]
  23. Villaverde J and Maza A (2009). The robustness of Okun's law in Spain, 1980–2004: Regional evidence. Journal of Policy Modeling, 31(2): 289-297. https://doi.org/10.1016/j.jpolmod.2008.09.003   [Google Scholar]