Empirical Evidence of Okun’s Law in the Philippine Economy: A Cointegration Analysis
Journal Title: Review of Socio-Economic Research and Development Studies - Year 2017, Vol 1, Issue 1
Abstract
This study investigates the influence of relevant macroeconomic variables on unemployment in the Philippines. Specifically, it aims to: find a coefficient that would characterize the relationship of the between unemployment and GDP using a standard cointegration approach; investigate relevant macroeconomic factors that may affect unemployment; and draw economic and policy implications that will guide policymakers in crafting public policies in improving employment generation. It used quarterly time series data from the first quarter of 1989 to fourth quarter of 2004. Cointegration test was used to determine the long-run relationship while an error correction was employed to determine the short-run behavior of the data. Results of the study reveals that in the long-run a 1% increase in GDP is associated with a reduction in unemployment by 0.7%. While in the short-run, GDP has a larger effect on cutting unemployment; an increase in GDP by 1% results to a decrease in unemployment by 0.95%. Thus there is evidence to indicate that Okun’s law is relevant in the Philippine economy. The sectoral analysis shows that the economy’s industrial and agriculture sectors are found to have a negative effect on the general unemployment level. However, the service sector on the other has a positive effect, implying that as its output grows, unemployment tends to rise as well. This is probably due to job and skills mismatch in the service sector which leads to structural unemployment. It is recommended that the industry sector be prioritized especially the manufacturing and construction subsectors, in the development planning process.
Authors and Affiliations
Karl John A. Galvez and Ernesto F. Bulayog
Keywords
Related Articles
- EP ID EP691444
- DOI -
- Views 162
- Downloads 0
Assessing the Impact of Super Typhoon Yolanda (Haiyan) on the Livelihood of Coconut Dependent Farmers in Kananga, Leyte and Sogod, Southern Leyte, Philippines
The coconut industry was heavily devastated when super typhoon Yolanda (internationally known as Haiyan) hit Eastern Visayas, Philippines in November 2013. This study aims to assess the impact of super typhoon Yolanda on...
Technology Business Incubation In A Philippine State University: Lesson Learned From South Australia Based Leading Technology Business Incubator
Transforming intellectual property into commercially-valued goods is a universal problem for universities. The Visayas State University (VSU) in Baybay City Leyte, Philippines is no exception. The capacities of VSU throu...
Economic Impact of Super Typhoon Yolanda on the Livelihood of Coconut (Cocos nucifera) Farmers in Selected Areas of Leyte
This paper examines the impact of the super typhoon Yolanda on the livelihood of coconut farmers in Leyte using quantitative approach. Impact evaluation answers to the cause-and-effect questions thus providing informatio...
Determinants of Carbon Emission among Households in Eastern Visayas, Philippines
Information and studies about carbon emissions are available on national level but it is very limited on regional level. Hence, we focus on Eastern Visayas and aim to investigate the influence of rising income and other...
Evaluating the Effectiveness of Teaching Strategies: The Case of a National Vocational School in Hilongos, Leyte
Evaluation of teaching strategies serves as a guide for diagnosis and improvement for effective teaching. However, studies focusing on the effectiveness of teaching strategies in Region 8, Philippines is a bit limited. H...