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Modeling the Relationship between GDP and Unemployment for Okun's Law Specific to Jordan

The objective of this paper is to measure the impact of economic growth on unemployment in the Jordanian economy in the short and long-run during the period (1980-2011) by implementing the okun's law. The relationship is measured by performing the gap model with Hodrick-Prescott filter (HP filter) to calculate the potential gross domestic product. To this end, an Autoregressive Distributed Lag (ARDL) approach to co-integration and the Error Correction Model (ECM) are employed to represent the short and long term relationship. The results indicate that the economic growth has a weak significant negative short- and long-run effect on unemployment.