UNEMPLOYMENT AND OUTPUT NEXUS: VALIDATION OF OKUN’S LAW IN PAKISTAN

The main objective of the study is to trace out the evidence about the possible affiliation between level of unemployment and growth rate of output which was proposed empirically by Arthur Okun in early sixties. To perform this multivariate time series data has utilized ranges the period from 1972 to 2019 of Pakistan. To access the association and to quantify the magnitude of relationship ARDL, bound test approach utilized. To check the order of integration ADF (Augmented Dicky Fuller) test applied. Paper confirmed the existence of inverse affiliation between level of unemployment and growth of output in Pakistan. But the intensity of association is very low, suggests that the political unrests and lack of attention of policy makers toward factor markets hampers the employment creation effect of growth of output. To check the pattern of association Granger causality test uses that prescribed the existence of unidirectional affiliation through unemployment to growth rate of output in Pakistan