Authors : Ola-David Oluyomi, Oluwatobi Stephen and Ogundipe Adeyemi
Abstract: Okun’s Law is one of the most enduring stylistic facts in macroeconomics. The objective of this study is to investigate the existence of an Okun-type relationship for the Nigerian economy during the period 1970-2013. After a unit root check was carried out using the Augment Dickey Fuller and Philip Perron tests, the Johansen cointegration technique was employed to find out whether or not long run relationship exists. It was discovered that a long run inverse relationship exists between unemployment and GDP in Nigeria. The Okun coefficient was 1.75% indicating that a 1% decrease in unemployment rate is accompanied by a 1.75% increase in GDP. The coefficient in Okun’s original work was 3% which is greater than the coefficient found in this study. This study supports the argument that the slope coefficient in the Okun’s model is unstable, hence, it varies across economies and periods. Thus, every effort made towards reducing the level of unemployment in Nigeria impacts the level of output on an increasing scale.
Ola-David Oluyomi, Oluwatobi Stephen and Ogundipe Adeyemi, 2016. Output and Unemployment Relationship: How Applicable Is the Okun’s Law to Nigeria?. The Social Sciences, 11: 1422-1427.