ANALYSIS OF THE RELATIONSHIP BETWEEN UNEMPLOYMENT AND GDP IN BOSNIA AND HERZEGOVINA: EVIDENCE FROM OKUN’S LAW

Faculty of Economics Pale, University of East Sarajevo, Republic of Srpska, BiH
Bosnia and Herzegovina


Abstract

This paper analyzes the relationship between the unemployment rate and gross domestic product (GDP) growth in Bosnia and Herzegovina, with the aim of determining whether Okun’s law holds in the observed period. The research is based on macroeconomic data for the period from 2000 to 2025, collected from relevant statistical sources. The study applies descriptive and econometric methods of analysis, including stationarity tests (ADF and DF), the Bounds cointegration test, and the ARDL model. The results indicate that there is no statistically significant long-term relationship between the unemployment rate and GDP growth, while a short-term negative relationship between these variables has been confirmed. The findings suggest that Okun’s law has limited applicability in Bosnia and Herzegovina and is primarily valid in the short run. Additionally, the results indicate that unemployment dynamics are influenced by other macroeconomic and structural factors, highlighting the complexity of the relationship between economic growth and the labor market.

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