Test of Okun’s Law in Albania During the Period 1995-2010

  • Abstract:
    The main objective if the study is to test the validity of Okun’s law during the period 1995-2010 in Albania and to find a confidence interval for Okun’s coefficient. When the annual real GDP growth and annual unemployment rates are estimated for Albanian economy over the specified period, it is found that one percent reduction in the annual unemployment rate would produce approximately 1.54% increase in the annual real GDP. The absolute value of Okun’s coefficient for Albania is lower to those estimated by some authors for other countries. The coefficient of correlation between successive differences in annual unemployment rates and successive differences in annual GDP is -35%. The 95% confidence interval for Okun’s coefficient is (-4.012;0.926).