Modeling the relationship between GDP and unemployment for Okun's law specific to Pakistan during 1976-2010

Okun’s law postulates a negative relationship between movements of the\nunemployment rate and the real gross domestic product (GDP). This article investigates\nthe link between the real GDP growth and unemployment, as described by Okun’s law.\nFor this purpose we have used time series annual data during the period 1976 to 2010\nand used unit root test, Hodrick–Prescott filter and least square method to find the\nrelationship between GDP growth and unemployment in Pakistan. The empirical analysis\nshows that a rise of one percentage point of unemployment is associated with a decline of\n0.36 percentage point of real GDP growth.