Economic Growth and Unemployment: An Empirical Assessment of Okun’s Law in The Case of Liberia (2001-2019)

Abstract

The purpose of this study is to examine the connection between economic growth and unemployment in Liberia between 2001- 2019. The unit root test and the Augmented Dickey-Fuller (ADF) Co-integration test were used to examine the relationship between unemployment and GDP. The Auto Regressive Distribution Lag (ARDL) bounds test is used to determine if the variables are linked in the long run. According to the results of the ARDL model, there is no long-run relationship between unemployment and economic growth. This study' results have particularly important policy implications for Liberian economic authorities. In both the long and medium term, the observational results show no meaningful relationship between unemployment and economic growth. The Liberian government should direct its spending toward activities that directly and indirectly promote the creation of employment and decent jobs, a conducive environment and flexible labor market policies or legislations that are not impediments to job creation, and finally, the government should prioritize labor intensive industries.

Keywords: Okun's law, unemployment rate, Economic Growth, Liberia

DOI: 10.7176/JESD/12-14-13

Publication date:July 31^st 2021