Validity of Okun’s Law for African Union Countries: Panel Data Analysis for the Period 1991-2023

The main objective of the study is to analyze the validity of Okun’s law for 48 African Union countries using annual growth and unemployment rate data covering the period 1991-2023. For this purpose, cross-sectional dependence, homogeneity and Panel Fourier Lagrange Multiplier (LM) unit root tests are used in the analysis part of the study. Then, the relationship between the variables is analyzed using the Panel Fourier cointegration test. Finally, for the long-run cointegration coefficient estimates between the variables, the Common Correlated Effects Mean Group estimator, or (CCE-MG) estimator as it is called in the literature, was used. According to the results of the analysis, unemployment has a negative impact on economic growth. Therefore, Okun’s law is found to be valid for the African Union countries. In addition, according to the CCE-MG estimator used in the study, it is concluded that there is an econometrically significant and negative relationship between economic growth and unemployment within the panel. The effect of unemployment variable on economic growth is calculated as -1.9. As a result of this calculation, it is concluded that for every 1% increase in unemployment, economic growth will be negatively affected by 1.9%.