Conference Title: International Conference in Business,Technology and Innovation 2013
Conference Title: UBT Publications
Contributing Editos: Prof. Albert Qarri, Prof. Ibrahim Krasniqi, Krenare Pireva, Evelina Bazini, Nita Abrashi
Co-Organizers: Ardian Emini, Vlora Aliu, Betim Gashi, Xhemajl Mehmeti, Kushtrim Dragusha, Murat Retkoceri, Kaltrina Bunjaku, Leonita Braha
Start Date: 2013-11-01
End Date: 2013-11-02
Venue, City, Country: : Hotel Bleart , Durres , Albania

Paper Title

The Relationship between Unemployment and Economic Growth in the Republic of Macedonia


Murat Sadiku , Luljeta Sadiku


A persistently high unemployment rate is a matter of concern for the case of Republic of Macedonia. Besides the fact that decreasing unemployment is a crucial factor for the economic development of the country, it creates a stable socio-economic climate. Therefore this study aims to estimate empirically the relationship between economic growth and unemployment rate in Macedonia applying the Okun’s Law. For estimating the Okun’s coefficient are used four types of models such that, the static model, the dynamic model, ECM model and VAR methodology, in order to consider both, the short term and the long term relationship. The time series techniques such that the Augmented Dickey-Fuller (ADF) for unit root and cointegration test are performed for the quarterly data covering the period 2000-2012. The results show a weak negative relationship between economic growth and unemployment, so the Okun’s coefficient is relatively low. For 1% increase of economic growth, the rate of unemployment decreases for 0.0191%. From the dynamic model we conclude that in the long term, the change of unemployment rate has lower impact on the change of economic growth rather than in the short term. Based on VAR methodology and the Engel-Granger cointegration test, it exists the long term relationship between these two variables and a change in the growth rate of real GDP causes a change in the rate of unemployment and vice-versa The study highlights that the country's economic policies have not been suitable for fostering development and reducing unemployment.


Economic growth, unemployment rate, correlation coefficient, Okun’s Law.