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May 2024

Modelling The Relationship Between Cyclical Output and Cyclical Unemployment: Empirical Validation of Okun’s Law - The Case of Morocco.

1KHLIFI Khalifa, 2GOURCH Abdelwahad
1PhD Student, Laboratory MAEGE, University Hassan II of Casablanca-Morocco Address: B.P 2634, Beau site Ain Sebaa (sis Marjane), Casablanca, Morocco
2Teacher-researcher, Laboratory MAEGE, University Hassan II of Casablanca-Morocco Address: B.P 2634, Beau site Ain Sebaa (sis Marjane), Casablanca, Morocco
DOI : https://doi.org/10.58806/ijirme.2024.v3i5n19

Abstract

The aim of this study is to analyse the dynamic relationship between economic growth and unemployment in Morocco. By examining the validity and asymmetry of Okun's law. Based on quarterly data covering the period from 2000 to 2022, we adopt a dynamic modelling of Okun's law, with the aim of estimating its elasticities during recessions and expansions using an ARDL model. The results of the study show the existence of an inverse relationship between GDP and unemployment with a strong persistence of the unemployment rate. The asymmetry study showed that unemployment reacts more strongly to negative deviations in real GDP than to positive deviations. In terms of policy implications, the study recommends the need to reform the structure of the Moroccan economy so as to allow the integration of a greater number of workers, while stimulating economic growth through the promotion of labour-intensive investment. Involving the Moroccan economy in a process of structural transformation is a crucial element, and investment in areas such as innovation, R&D or digital technology can help to increase real gross domestic product and consequently reduce the unemployment rate.

KEYWORDS:

Economic growth, Unemployment, Okun's Law, ARDL

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