Testing the validity of okun’s rule of thumb across palestine and Israel
Testing the validity of okun’s rule of thumb across palestine and Israel
Date
2017-12-08
Authors
Awad, Ibrahim
Hallam, Arne
Alialhuseen, Mahmoud
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Abstract
This study aims at investigating the validity of Okun’s law across Palestine and Israel
using quarterly time series data for the period 2000: Q1 - 2014: Q1. Different econometric and
statistical techniques of Ordinary Least Square, Granger causality tests, co-integration, and
the Vector Error Correction Model are used to accomplish the overall objective of this study.
The principal conclusion indicates that the Okun’s law does not hold in both Palestine and
Israel, so that policymakers are advised to constantly direct human and other resources from
unproductive to sustainable and productive activities that can shift aggregate demand and real
output growth upwards. Toward this end, political stability and efficient governance should be
taken into account.
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Keywords
GDP growth, Granger causality test, Israel