An analysis of production and unemployment in Nicaragua 1980-2014

Abstract

This article, shows the three empirical specifications developed by Arthur Okun (Okun, 1962), an American economist, who established the relationship between productive growth and unemployment in the United States, based on the data collected during the 1950s. The methodology is quantitative because it used the equation first differences, to estimate the empirical relationship between production and employment, using data from 1980 to 2014 with annual frequency published by the Central Bank of Nicaragua, but taking into account that there were changes in the calculation of the base year of the real GDP data. The econometric software Gretl available on the internet was used to develop the model. The statistical approach has focused on the introduction of a stochastic trend in the regression model, assessing the structural changes of recent years in the Nicaraguan economy. It shows that there is a positive relationship between production and unemployment, which implies that an increase of 1% of the product is accompanied by an increase in unemployment of 0.18%. The variables move in the same direction, contradicting economic theory.