Unemployment Rate, Real GDP Growth, OLS, Inverse Relationship


This paper reinvestigates the validity of the Okun’s Law on its inverse relationship between unemployment rate and real GDP growth rate in Indonesia using annual data. The sample period spans from 1984 through 2019 with 36 observations. Data are obtained from the International Monetary Fund (www.imf.org). The time series data distributions of both variables are near-normal in their mean-to-median ratio, accompanied by relatively high standard deviations. To provide linear and unbiased estimates parameters, the Ordinary Least Squares (OLS) is utilized to estimate regressions (1) and (2). The slope-coefficients provide evidence of very weak inverse relationship between the variables in terms of the associated t-value and p-value.