Attempting To Forecast Unemployment Rates In Algeria

Abstract

This research paper aims to apply some econometric models and quantitative methods to analyze the relationship between unemployment and economic growth in Algeria in the period from 1984 to 2024; in an attempt to forecast unemployment rates. The Hodrick-Prescott filter technique was used to extract the data series of both the natural unemployment rate and the potential Gross Domestic Product. The study utilized the Autoregressive Distributed Lag (ARDL) and the LS with Breakpoints (BLS) method within the framework of the Okun model of unemployment. The empirical analysis revealed a fluctuating relationship between unemployment and economic growth, as the inverse relationship was observed in 2019 and 2021, but not in 2020 and 2022, which aligns logically with the actual economic conditions during those years. The predictive generated by the ARDL model conformed to economic theory, while those obtained from BLS model contradicted economic theory but were consistent with the Algerian economic reality.