This paper aims to empirically examine the relationship between GDP and unemployment in Somalia from 2000 to 2021. The study also estimates Okun’s coefficient. To
evaluate the association between the unemployment rate and economic growth,
we employ the Hodrick–Prescott (HP) filter detrending technique, the Augmented
Dickey–Fuller (ADF) test, ordinary least squares (OLS), and fully modified OLS. The
findings of this study demonstrate that the series is stationary at the level. However,
the results confirm a statistically insignificant negative relationship between unemployment and economic growth. Consequently, our findings suggest that Okun’s law
does not apply in Somalia. For robustness, we employ fully modified ordinary least
squares (FMOLS), canonical cointegrating regression (CCR), and dynamic ordinary least
squares (DOLS). Nevertheless, the relationship between the GDP gap and unemployment is not strong enough to be considered statistically significant, and other factors
may also influence unemployment. Therefore, policies aimed at reducing unemployment should take into account various factors, including education and training, labor
market regulations, and social protection measures.
Keywords: Okun’s coefficient, Okun’s law, Gap version, Fully Modified OLS