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Assessing the effect of trade and FDI on growth-unemployment nexus

March 2024
Equilibrium 19(9):59-91

DOI:10.24136/eq.3006

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CC BY 4.0

Authors:

Akvilė Aleksandravičienė

Vytautas Magnus University

Mindaugas Butkus

Vilnius University

Tomas Kadisa

Vytautas Magnus University

Research background: Unemployment is a huge topic for policymakers, scholars, and, in general, society. Historically, there have always been a lot of discussions about this phenomenon. It is already acknowledged that unemployment is closely related to economic activity: when the economy is growing, more people are employed, and when economic activity is low, employment decreases, and unemployment rises. This relation is well-researched in the framework of Okun’s law. However, it is far less known how this relationship holds if international economic relations are introduced. Thus, the motivation for the research was to examine the role of international trade and foreign direct investment (FDI) on the growth-unemployment nexus. Purpose of the article: To assess how trade and FDI affect growth and gender-, age-, and educational attainment level-specific unemployment relationship and on what scale this effect varies over different business cycle phases. Methods: Scientific literature review, comparative analysis, and panel regression. Findings & value added: Given the lack of research examining what effect FDI and trade have on the growth-unemployment nexus, this paper estimates modified Okun’s equation on the European Union (EU) countries (EU–28, by the composition of the EU until 31/01/2020) for the period from 2000 to 2019 while incorporating international aspects that can have an impact on this nexus. Also, this study develops a specification that can be useful to monitor the potentially different effects of FDI and trade on the growth-unemployment nexus during different business cycle phases. The estimations of the panel regression for unemployment disaggregated by age, gender and education level has showed that import, export, inward FDI, and outward FDI have a negative effect on the growth-unemployment nexus. It means that with an increase in the intensity of international economic relations, the influence of gross domestic product (GDP) growth on unemployment becomes less significant. Thus, the effectiveness of expansionary fiscal policy to reduce unemployment becomes less effective in more open economies, which in the case of the EU are the smallest member states with relatively small domestic markets.

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Equilibrium. Quarterly Journal of Economics and Economic Policy

Volume 19 Issue 1 March 2024

p-ISSN 1689-765X, e-ISSN 2353-3293

www.economic-policy.pl

This is an Open Access article distributed under the terms of the Creative Commons Attribu-

tion License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use,

distribution, and reproduction in any medium, provided the original work is properly cited.

ORIGINAL ARTICLE

Citation: Aleksandravičienė, A., Butkus, M., & Kadiša, T. (2024). Assessing the effect of trade

and FDI on growth-unemployment nexus. Equilibrium. Quarterly Journal of Economics and

Economic Policy, 19(1), 59–91. https://doi.org/10.24136/eq.3006

Contact to corresponding author: Tomas Kadiša, tomas.kadisa@vdu.lt

Article history: Received: 1.04.2023; Accepted: 3.03.2024; Published online: 30.03.2024

Akvilė Aleksandravičienė

Vytautas Magnus University, Lithuania

orcid.org/0000-0003-4882-5602

Mindaugas Butkus

Vytautas Magnus University, Lithuania

orcid.org/0000-0003-2381-5440

Tomas Kadiša

Vytautas Magnus University, Lithuania

orcid.org/0009-0003-4647-4252

Assessing the effect of trade and FDI on

growth-unemployment nexus

JEL Classification: E22; E24; F14; O11

Keywords: foreign direct investment; unemployment; trade; gross domestic product; Okun’s law

Abstract

Research background: Unemployment is a huge topic for policymakers, scholars, and, in

general, society. Historically, there have always been a lot of discussions about this phenome-

non. It is already acknowledged that unemployment is closely related to economic activity:

when the economy is growing, more people are employed, and when economic activity is low,

employment decreases, and unemployment rises. This relation is well-researched in the

framework of Okun’s law. However, it is far less known how this relationship holds if interna-

tional economic relations are introduced. Thus, the motivation for the research was to examine

Equilibrium. Quarterly Journal of Economics and Economic Policy, 19(1), 59–91

the role of international trade and foreign direct investment (FDI) on the growth-

unemployment nexus.

Purpose of the article: To assess how trade and FDI affect growth and gender-, age-, and

educational attainment level-specific unemployment relationship and on what scale this effect

varies over different business cycle phases.

Methods: Scientific literature review, comparative analysis, and panel regression.

Findings & value added: Given the lack of research examining what effect FDI and trade have

on the growth-unemployment nexus, this paper estimates modified Okun’s equation on the

European Union (EU) countries (EU–28, by the composition of the EU until 31/01/2020) for the

period from 2000 to 2019 while incorporating international aspects that can have an impact on

this nexus. Also, this study develops a specification that can be useful to monitor the poten-

tially different effects of FDI and trade on the growth-unemployment nexus during different

business cycle phases. The estimations of the panel regression for unemployment disaggregat-

ed by age, gender and education level has showed that import, export, inward FDI, and out-

ward FDI have a negative effect on the growth-unemployment nexus. It means that with an

increase in the intensity of international economic relations, the influence of gross domestic

product (GDP) growth on unemployment becomes less significant. Thus, the effectiveness of

expansionary fiscal policy to reduce unemployment becomes less effective in more open

economies, which in the case of the EU are the smallest member states with relatively small

domestic markets.

Introduction

Unemployment was a great concern during the worst economic crisis since

the Great Depression and brought new attention in the aftermath of the

Covid-19 pandemic. This phenomenon is closely related to economic

growth — when the country's economy grows, unemployment decreases

and vice versa. The strength of this relationship is estimated by applying

Okun’s law (International Labor Office, 2010).

However, today’s world is not limited to domestic economies. Due to

(re)globalization, the world interconnects rapidly, and multicountry eco-

nomic relations play a significant role. Thus, a country’s economic growth

may be affected more internationally than domestically. Foreign direct

investments and international trade are one of the major global factors that

can stimulate growth and, thus, reduce unemployment (Shaari et al., 2012;

Sun & Heshmati, 2010; Felbermayr et al., 2011). Foreign direct investments

are very important, especially for developing countries. It is a perfect tool

for companies or countries to be involved in international relations and

benefit from them by creating better economic conditions, entering new

markets, and creating jobs.

Equilibrium. Quarterly Journal of Economics and Economic Policy, 19(1), 59–91

Literature discloses different effects of outward and inward FDI on un-

employment. Inward FDI is seen as an unemployment-reducing factor

(Rizvi & Nishat, 2009; Estrin, 2017; Dritsakis & Stamatiou, 2018; Su et al.,

2018). Meanwhile, outward FDI can increase (Agarwal, 1996; Chen, 2010;

Huijie, 2018) or reduce (Irpan et al., 2016; Yueming, 2014) unemployment.

Other research emphasized the effect of FDI on growth. Gochero and

Boopen (2020) found a positive long-run effect of inward FDI on GDP in

host countries. Ali et al. (2018) found a positive effect of outward FDI on

GDP.

There have been many discussions about the relationship between trade

and growth in the last few decades. As Sun and Heshmati (2010) pointed

out, globalization and liberalization are the factors that allow countries to

be more linked to openness. Awad-Warrad (2018) concluded that openness

to trade correlates with growth and reduces unemployment. Bivens (2015)

argued that trade deficit increases unemployment. However, Worstall

(2015) stated that jobs could not be lost, even if there is a trade deficit.

While Mohler et al. (2018) found that import increases unemployment, an

opposite effect was documented by Jin et al. (2019). Ebrahimi's (2017) find-

ings reveal no relationship between growth and import. Kim et al. (2007)

did not find any effect of export on economic growth. Bakari and Mabrouki

(2017) stated no link between import, export, and growth. However, Kaur

et al. (2017) found a link between export and GDP. Thus, the literature does

not provide a clear answer about the effect of import and export on growth

and unemployment.

It is noteworthy to mention that economic growth could have a diverse

effect on different unemployment disaggregated by age, gender, and level

of education. These specific unemployment characteristics are discussed by

Butkus et al. (2020). Göçer and Erdal (2015) analyzed the relationship be-

tween growth and youth unemployment and found that a growth rate

above the average can reduce youth unemployment. Brincikova and Dar-

mo (2015) studied the impact of growth on gender-specific unemployment

and concluded that male unemployment is more sensitive to growth than

female unemployment. Another important aspect of the growth-

unemployment nexus is associated with education. It is noted that econom-

ic progress affects low-skilled and high-skilled unemployment differently:

low-skilled unemployment increases while high-skilled unemployment

decreases (Moreno-Galbis & Sneessens, 2007).

Equilibrium. Quarterly Journal of Economics and Economic Policy, 19(1), 59–91

Hence, trade, FDI, and age-, gender-, and education attainment level-

specific unemployment are considered in this research since they are poten-

tially important aspects of the growth-unemployment nexus in the context

of Okun’s law. Moreover, the growth and decline phases of the business

cycle are taken into account since previous research stresses the asymmet-

ric reaction of unemployment to growth during different stages of the

business cycle.

Considering all these factors, the problem of this paper focuses on in-

corporating international economic relations in the growth-unemployment

nexus within the asymmetric framework of Okun’s law. The research aims

to examine if trade and FDI affect the impact of growth on gender-, age-,

and educational attainment level-specific unemployment and on what scale

this effect varies over different business cycle phases. The research is fo-

cused on 28 EU countries between 2000 and 2019. In this paper, we use

a scientific literature review and comparative analysis. According to panel

diagnostics, we apply the differenced version of pooled ordinary least

squares (OLS) to estimate our specifications.

The paper is focused on disclosing the interconnection between trade,

FDI, economic growth, and unemployment. Having this information is

crucial for understanding how each variable interplays and influences one

another. When creating new policies it might help to understand the labor

reaction to changes and adapt labor laws according to it. Also, it provides

a view of how the global market affects the economy and allows regions to

estimate the FDI benefits in their market. It should help to understand how

technology shift might affect labor and which sectors have the most poten-

tial. Finally, by understanding the effect of each particle in their economy

the policymakers would be able to adjust and focus the target area of their

global policies to improve their economic performance.

The paper is divided into four main sections. Section 2 presents the re-

cent literature review as a theoretical background of this research. Section 3

specifies the research methodology, including the data set, method, re-

search logic, hypothesis, and research reasoning. The results of the research

are presented in Section 4, while the discussion following these results is

carried out in Section 5. At the end of the paper, conclusions are provided,

including the research limitations, suggestions for future research, implica-

tions, and recommendations for practice.

Equilibrium. Quarterly Journal of Economics and Economic Policy, 19(1), 59–91

Literature review

Unemployment as an economic term emerged in the 1930s, and the defini-

tion of this phenomenon refers to people who don’t have a job, but are

actively seeking one (Card, 2011). There were many theories regarding this

phenomenon, and many researchers analyzed changes in unemployment

levels over different periods.

It is not surprising that unemployment was the highest during the worst

economic crisis (International Labor Office, 2010). That is related to the fact

that unemployment is closely linked to economic activity. The phenomena

of economic growth and/or unemployment during the Covid-19 period

were analysed by Privara (2022), Kramarova et al. (2022), etc. As Louail and

Benarous (2021) stated, one of the main factors in understanding an im-

portant economic phenomenon — unemployment — is the interaction be-

tween growth and unemployment rates. Arthur Okun was the first to em-

pirically estimate the relationship between the unemployment rate and

growth in the US in the 1960s. If the GDP or output decreases, it means the

labor demand also decreases in the market, resulting in the growth of un-

employment. Okun’s theory states that when GDP drops by 2 percent, un-

employment should rise by one percentage point (Chamberlin, 2011).

However, theoretically, the relation between economic growth and unem-

ployment was described in the early 1930s by Keynes, who stated that

“changes in employment should result from changes in economic growth

due to aggregate demand and low growth leads to an increase in unem-

ployment“ (Meyer, 2017).

Among various factors affecting growth and unemployment as a sepa-

rate phenomena, international trade and foreign direct investment are the

most crucial and most widely discussed in the scientific literature. Still,

there is almost non-existent literature on how trade and FDI affect the im-

pact that growth has on unemployment, i.e. growth-unemployment nexus.

As Sun and Heshmati (2010) stated, globalization and liberalization are

the factors that allow countries to become more linked to openness. A logi-

cal assumption is that a trade surplus brings money to the country where

the product was produced, stimulating public demand. This effect can de-

crease unemployment. Contrarily, in times of trade deficit, money leaving

the country can cause an increase in unemployment. The research per-

formed by Awad-Warrad (2018) concluded that openness to trade corre-

lates with GDP and reduces unemployment. Bivens (2015) argued that

Equilibrium. Quarterly Journal of Economics and Economic Policy, 19(1), 59–91

trade is a crucial factor for unemployment, and a trade deficit influences an

increase in unemployment since, in times of trade deficit, a loss for local

demand will make a reaction in the market as the need for labor is lower.

In terms of import, Mohler et al. (2018) found that import significantly

affects the probability of becoming unemployed in the case of the low-

skilled labor force. Gonese et al. (2023) also found that import positively

affects unemployment, but only in the long run. An opposite effect was

detected by Jin et al. (2019). The scientists proved that import reduces un-

employment in developing countries and countries with low service and

high industry sectors. The findings of Ebrahimi (2017) reveal that there is

no relation between GDP (dependent variable) and import (independent

variable). The same result was found in the research of Sarker (2024), who

proved an insignificant effect of import on growth in both the short run

and long run. However, Kim et al. (2007) found a positive effect of import

on total factor productivity, which is one of the main factors of economic

growth. Altaee et al. (2016) concluded that import has a negative effect on

real GDP growth in Saudi Arabia.

Kim et al. (2007), using the growth of total factor productivity as

a measure of economic growth, did not find any effect of export on eco-

nomic growth. Bakari and Mabrouki (2017) provided a result about both

trade factors and stated that there is no link between import, export, and

GDP. However, Kaur et al. (2017) found a bidirectional causality between

GDP and export. Usman et al. (2012) and Sarker (2024) proved a positive

effect of export on GDP. As regards unemployment, Gonese et al. (2023)

found that export negatively affects unemployment, but only in the long

run. Thus, the scientific literature does not provide a clear answer about the

effect of import and export on economic growth and unemployment.

One more important aspect is foreign direct investment. It is one of the

most important areas, especially for developing countries. FDI is a perfect

tool for companies or countries to be involved in international relations and

benefit from it, for example, by creating better conditions and expansion

elsewhere, creating workplaces in other regions. As Koluman (2020) stated,

FDI is investments from one region, country, or company to another coun-

try to build a business in another country where labor costs are cheaper.

Logically, a final result could be a loss of the country of origin since money

or part of GDP and labor demand goes to another region. In theory, the

receiver of foreign direct investment should benefit from this situation

since that investments will create new jobs in the country.

Equilibrium. Quarterly Journal of Economics and Economic Policy, 19(1), 59–91

There are many discussions in the scientific literature regarding the rela-

tionship between FDI and economic growth. Marasco et al. (2023),

Fazaalloh (2024), and Sarker (2024) found strong evidence that FDI is posi-

tively associated with growth in the host country. Also, the findings of

Mwakabungu and Kauangal (2023) study reveal a positive and statistically

significant unidirectional causality from FDI inflows to economic growth in

both long and short run. A conventional approach says that inward FDI

increases economic growth and is related to growing employment (Rizvi &

Nishat, 2009). This kind of relationship between inward FDI and unem-

ployment is also discussed by Estrin (2017), Dritsakis and Stamatiou (2018),

Su et al. (2018), and Alfalih (2024). In terms of outward FDI, Agarwal

(1996), Chen (2010), and Huijie (2018) have proven a positive effect of out-

ward FDI on unemployment. However, other scientists, for example, Irpan

et al. (2016) and Yueming (2014), found out that outward FDI negatively

affects unemployment. Also, it is worth mentioning Chang (2009) research,

where the author proved the existence of weak exogeneity between out-

ward FDI and the unemployment rate. Kim et al. (2020) confirmed the im-

portance of FDI on growth. The results of the research reveal a negative

link between output and unemployment during a recession, because of the

impact of FDI on growth. Thus, in general, the results are ambiguous.

When analyzing Okun’s law, it became clear that the literature focuses

on the influence of various factors on separate variables of this law, but not

on their nexus. This article will fill the gap in the literature.

The empirical examination of Okun’s law was based on total unem-

ployment. However, an important aspect in our context is gender-, age-,

and educational level-specific unemployment. There are many explana-

tions for gender gaps in unemployment in the scientific literature. Authors

single out male-dominated occupations, productivity, personal characteris-

tics, disparities in distribution across sectors, labor market institutions, and

other factors that can affect gender differences in unemployment (Passin-

has & Proença, 2020). Empirical evidence was provided by Queneau and

Sen (2008), who analyzed differences between male and female unem-

ployment in the OECD countries and made a conclusion that there is

a minor disparity between gender-specific unemployment only in the US,

Canada, and Germany. Albanesi and Şahin (2018) analyzed the effect of

economic shocks on gender-specific unemployment and found that the

difference between male and female unemployment significantly escalated

after economic shocks since male unemployment increased more. Brinciko-

Equilibrium. Quarterly Journal of Economics and Economic Policy, 19(1), 59–91

va and Darmo (2015) and Kim and Park (2018) found that changes in GDP

affect male unemployment more than female unemployment.

The research carried out by Butkus and Seputiene (2019) proved some

differences regarding unemployment and gender from one region to an-

other, and the result of youth unemployment is significant. The scientists

described the reasons for the more sensitive reaction of youth unemploy-

ment to the business cycle, i.e., low experience, temporary job contracts,

etc. Dunsch (2017) analyzed unemployment in terms of age and gender in

Central and Eastern European countries and concluded that young people

react more sensitively to business cycle fluctuations, regardless of gender.

Among many others, Axelrad et al. (2018) acknowledge that youth unem-

ployment is relatively higher than for the elderly population. That could be

because people start working seasonal jobs at a very young age, which are

lost when the season ends. Göçer and Erdal (2015) analyzed the relation-

ship between growth and youth unemployment and found that a growth

rate above the average can reduce youth unemployment. Ihensekhien and

Aisien (2019) also studied the growth and youth unemployment nexus and

found that Okun’s law does not work in upper-middle-income countries in

Sub-Saharan Africa.

Education is another important aspect of the growth and unemploy-

ment nexus. The more educated a person is, the better job that person can

get, and the better job an individual has, the fewer chances of being unem-

ployed. It is noted that economic progress affects low-skilled and high-

skilled unemployment differently: low-skilled unemployment increases

while high-skilled unemployment decreases (Moreno-Galbis & Sneessens,

2007). Askenazy et al. (2015) examined the relationship between education-

al level-specific unemployment and GDP growth and found that higher-

educated employees tend to experience a more negligible effect on unem-

ployment from output fluctuations.

A range of scientific papers analyzed the idea of Okun’s law. However,

as Louail and Benarous (2021) noted, theoretical analysis reveals that

Okun’s law does not always work. Koettl et al. (2013) stated that after the

2008 crisis, unemployment remained very high, despite fast economic

growth. It suggests that after an economic shock, the interdependency can

change, and Okun’s theory is not necessarily a rule of thumb. Omoshoro-

Jones (2021) analyzed an asymmetricity in Okun’s law and confirmed it in

the long- and short-run. The asymmetric relationship between output and

Equilibrium. Quarterly Journal of Economics and Economic Policy, 19(1), 59–91

unemployment is crucial for policymakers, since it can lead to forecasting

errors and misspecification (Harris & Silverstone, 2001).

An et al. (2017) suggest that Okun’s law works in developed or higher-

than-average-income countries, but the results from the lower or middle-

income countries are not as expected. It may be due to the heterogeneity of

the countries. An assumption can be made here that FDI and international

trade can influence the difference in terms of Okun’s law, as developed

countries are more involved in these activities. Also, there could be many

other factors that can strongly affect the growth-unemployment nexus in

developing countries. Pizzo (2019) studied Latin American countries and

found relatively different Okun’s coefficients compared to the one found

by Okun for the US. This finding suggests that Okun’s law’s coefficients

might differ in various regions, but, as An et al. (2019) stated, Okun’s theo-

ry is still a good tool for finding coefficients of the unemployment-growth

nexus.

In summary, empirical studies on the impact of trade and FDI on

growth and unemployment can be found in the literature. With regard to

studies on the effects of international trade on unemployment, the litera-

ture emphasises the effect of trade on unemployment and growth, with

conflicting evidence on the exact nature of this relationship. Empirical ap-

proaches that dominate the literature also include the study of the effects of

FDI on growth and unemployment. Conventionally, inward FDI increases

economic growth and employment, while the effect of outward FDI is not

straightforward. The discussion also includes the study of unemployment

by gender, age and education. The literature reveals gender differences, the

increased sensitivity of youth unemployment to economic fluctuations and

the impact of education on reducing the risk of unemployment. Empirical

evidence also shows that the relationship between output and unemploy-

ment can be asymmetric, especially after economic shocks, challenging the

traditional understanding of Okun's law as a universal rule.

Hypotheses development

The research examine how FDI and trade impact the effect of growth on

unemployment in the context of Okun’s theory. Moreover, considering the

recent findings of the asymmetric effect (Koettl et al., 2013; Omoshoro-

Jones, 2021) of growth on unemployment over the periods of economic

Equilibrium. Quarterly Journal of Economics and Economic Policy, 19(1), 59–91

boom and decline, we develop a specification that allows looking more

closely to the potentially different effect of FDI and trade on growth-

unemployment nexus during different phases of the business cycle.

The reasoning of the research

A vast amount of literature analyses how FDI and/or trade affect unem-

ployment (Alfalih, 2024; Irpan et al., 2016; Yueming, 2014; Bivens, 2015;

Worstall, 2015; etc.) and/or growth (Sarker, 2024; Rizvi & Nishat, 2009; Kim

et al., 2007; Bakari & Mabrouki, 2017; Huijie, 2018; etc.). However, there is

a lack of research examining what effect FDI and trade have on the growth-

unemployment nexus, i.e., whether FDI, trade, and, more importantly,

their direction change the impact that growth has on unemployment. FDI

flows and trade that transfers new technologies, business practices, etc.,

could dramatically change the growth effect on unemployment. It is an

important question since globalization played and still plays a vital role in

the world’s economy. Furthermore, it is also relevant to understand how

recent trends in deglobalization, which started right after the great financial

crisis and accelerated during the COVID-19 pandemic, may change the

growth-unemployment nexus.

Moreover, our research considers unemployment disaggregated by age,

gender, and educational attainment level since previous research (Askena-

zy et al., 2015; Butkus et al., 2020) shows that Okun’s coefficient (as a meas-

ure of the effect of growth on unemployment) varies considerably among

age-, gender-, and educational attainment level-specific unemployment.

Also, the growth and the decline phases of the business cycle are taken into

account since previous research emphasizes that the effect of output

change on unemployment is bigger during the decline than during the

growth phase. All these aspects combined in one specification should allow

for examining the growth-unemployment nexus in today's world, where,

due to globalization, economic conditions could be primarily affected by

phenomena not caused by domestic factors but contrary brought from

abroad.

Formulation and argumentation of the hypothesis

According to the research results presented in the literature review, it is

clear that in most countries the output or GDP fluctuations substantially

Equilibrium. Quarterly Journal of Economics and Economic Policy, 19(1), 59–91

affect unemployment. If, for instance, GDP rises, the unemployment level

plummets, and vice versa, as the classical view of Okun’s law suggests.

However, another part of the literature review allowed us to see that many

other global economic aspects correlate with GDP and unemployment and

might affect their relationship. We will focus our research on some varia-

bles — inward FDI (iFDI), outward FDI (oFDI), and import and export.

The logic behind FDI is that it indirectly affecs GDP. Thus we hypothe-

size:

H1: FDI lowers the sensitivity of the unemployment level to GDP fluctuations.

If the hypothesis turns out to be confirmed, it could suggest that FDI, in

some ways, protects us from the unemployment increase while the econo-

my is facing a downturn. But on the other hand, if unemployment is high,

FDI might mitigate the effect of GDP growth and prevent unemployment

fall from keeping up with the GDP growth.

Considering trade, we hypothesize:

H2: Trade mitigates the reaction of unemployment to GDP fluctuations due to

changes in the demand.

Confirmation of this hypothesis would suggest that the higher the vol-

ume of imports, the less influence GDP has on unemployment; and the

higher the volume of export, the lower the effect of GDP on unemploy-

ment.

The research logic, methods, and data sample

The research focuses on the European Union (EU

–

28) countries and covers

twenty years, i.e. 2000–2019. We deliberately omit data for 2020 due to the

atypical distortions caused by the COVID-19 pandemic. Our dataset con-

sists of output, inward and outward FDI, import and export, and gender-,

age-, and educational attainment level-specific unemployment collected

from Eurostat (2020, n.d.) and Unctad (n.d.). Descriptive statistics of the

variables are presented in Table 1 in the Annex.

We can specify a standard fist-differenced version of Okun’s equation

for the panel data as follows:

Equilibrium. Quarterly Journal of Economics and Economic Policy, 19(1), 59–91

∆

,

=  + ∆

,

+ 



+ 

,

, (1)

where ΔU is the unemployment change in percentage points from period t-

1 to period t, and ΔY is the output growth, i.e. the percentage change of the

real GDP. θt represents the time-specific effects modeled by including time

dummies. Since all variables enter Eq. (1) as their first differences, the time-

invariant country-specific effects do not appear in our specifications as they

are “differenced away”. εi,t is the idiosyncratic error term.

We estimated Eq. (1) using pooled OLS since panel diagnostics revealed

that pooled OLS is more adequate than LSDV estimator, which is not sur-

prising since first-differencing removes any observed and unobserved

time-fixed effects. Eq. (1) allows us to examine the basic principle of Okun’s

law, i.e., that change in GDP is in negative relation to the change in an un-

employment level. The estimated negative β coefficient would provide

empirical evidence in line with Okun’s law. However, Eq. (1) assumes the

relationship is symmetric through different economic cycles. To test

whether the growth-unemployment relationship is asymmetric over the

growth and decline periods, we specify Eq. (2):

∆

,

=  + ∆

,

+ 



∆

,

× 

,

+ 

,

+ 



+ 

,

, (2)

where a binary variable dn is equal to 1 for downturn periods and 0 other-

wise. Since dn interacted with an output change, now β shows the growth-

unemployment nexus over the economic growth period and β+δn shows the

nexus during economic decline. Considering the previous research, we

expect that the unemployment reaction to GDP fluctuations is smaller dur-

ing the expansion stage compared to the downturn stage. For instance, if

there is steady economic growth and unemployment is relatively low, the

GDP change may have a smaller effect than during an economic recession,

when unemployment is high, and the change of output may have a much

more significant impact.

To incorporate FDI or trade as the mediator into Okun’s framework, we

can specify the interactive equation with the multiplicative term:

∆

,

=  + ∆

,

+ 



∆

,

× 

,

+ 

,

+ 



+ 

,

, (3)

where X represents FDI or trade. This equation allows taking the existing

growth-unemployment relationship and testing if FDI or trade changes it

Equilibrium. Quarterly Journal of Economics and Economic Policy, 19(1), 59–91

and in what direction. Eq. (3) highlights the possibility that even though

Okun’s coefficient might be valid, the other factors could alter its size to

a certain degree as the coefficient now is composite, i.e.  + 



× 

,

. The

assumption is that international relations lower the sensitivity of unem-

ployment to GDP fluctuations.

The final specification allows us to separate the effect of FDI and trade

on growth-unemployment nexus over different economic phases, namely

economic growth and economic downturn. For this purpose, we combine

Eqs. (2) and (3):

∆

,

=  + ∆

,

+ 



∆

,

× 

,

+ 



∆

,

× 

,

(4)

+

,

∆

,

× 

,

× 

,

+ 

,

+ 

,

+ 



+ 

,

where  + 



× 

,

shows the effect of FDI or trade on the growth-

unemployment nexus over the economic growth period. To find how FDI

or trade affects the grow-unemployment nexus over periods of economic

downturn, we need to find a composite slope coefficient  + 



× 

,





+

,

× 

,

Since equations are interactive with multiplicative terms, the estimated

slopes become conditional, i.e., the growth-unemployment nexus is not

constant but depends on the FDI or trade and business cycle simultaneous-

ly. The same stands for the significance of this nexus, i.e., it becomes condi-

tional since standard errors associated with slope coefficients vary depend-

ing on the size of FDI or trade and 

,

. We calculate standard errors using

formulae developed by Brambor et al. (2006). Moreover, we used Arellano

heteroscedasticity and serial correlation-robust standard errors to minimize

the possibility that the significance of the estimated Okun’s coefficient may

be biased.

Our study analyzing the impact of FDI and trade on the relationship be-

tween economic growth and unemployment based on Okun's theory has

several strengths and drawbacks in its design. The study recognizes the

unequal impact of economic development on unemployment by distin-

guishing between times of expansion and downturn. This method enables

a more thorough comprehension of economic dynamics and the possible

fluctuations in the effects of FDI and trade. Utilizing unemployment statis-

tics according to age, gender, and educational attainment levels enhances

the study. The model acknowledges the diversity present in the labor mar-

ket and has the potential to reveal varying effects of economic policies and

Equilibrium. Quarterly Journal of Economics and Economic Policy, 19(1), 59–91

international economic linkages on various demographic groups. Using

first-differences pooled OLS and accounting for heteroscedasticity and

serial correlation-robust standard errors improves the results. Utilizing

interactive equations to assess the mediation impact of FDI or trade adds

a complex analytical dimension to explore the conditional linkages.

Our technique has several potential flaws. Multiplicative terms in equa-

tions provide a detailed investigation of conditional linkages but may

complicate understanding. Interaction effects may complicate the separa-

tion of the separate influences of FDI and trade from their joint impact with

economic cycles. The research primarily examines FDI, trade, and econom-

ic cycles, however there might be other important factors like policy chang-

es, technology improvements, or labor market restrictions that influence

the relationship between growth and unemployment but are not consid-

ered. This constraint may result in an inadequate comprehension of the

dynamics in action. Excluding 2020 data because of COVID-19 disruptions

may make the conclusions less relevant to economic situations after the

epidemic. The unique COVID-19 economic effect may have changed the

basic relationships among FDI, trade, and unemployment. Limiting the

study to EU-28 nations may restrict the applicability of the results to other

locations, particularly emerging countries or economies with varying de-

grees of globalization exposure. The unique economic, social, and regulato-

ry environments of the EU may impact the relationship between growth

and unemployment in a distinct manner compared to other locations.

Results

This part is designated to present empirical findings and their interpreta-

tions. Moreover, the research hypothesis will be examined through the

prism of the estimation results.

The idea of the research is that GDP growth and unemployment rela-

tionship is affected by the FDI and trade. For this reason, the effect of four

variables was examined: import, export, inward FDI, and outward FDI.

Seven different unemployment variables were considered: total unem-

ployment, youth unemployment, male unemployment, female unemploy-

ment, and three different categories of education-level-specific unemploy-

ment. Estimates are based on Eq. (4), and the effect of FDI and trade on the

growth-unemployment nexus is presented separately over the periods of

Equilibrium. Quarterly Journal of Economics and Economic Policy, 19(1), 59–91

economic growth and decline. Combining seven unemployment variables,

four moderating variables (iFDI, oFDI, import, and export), and two phases

of the business cycle, we have 52 estimations.

Estimations are based on pooled OLS model and 20 years of data for 28

countries. All estimations include time dummies to account for inter-

temporal changes in the growth-unemployment nexus common to all 28

countries. Also, the Arellano method was used to robust standard errors.

Import. As mentioned in the literature review and research methodolo-

gy, the assumption is that the higher the percentage of imports to GDP, the

less influence GDP growth has on unemployment. Tables 2 and 3 in the

Annex show the conditional growth-unemployment nexus while the im-

port variable is introduced to an equation as the moderator.

The group of tables represents seven unemployment variables under

investigation during economic growth and decline phases. The left column

shows the import percentage of GDP, and the rest columns to the right

show the effect of a one percent change in GDP on unemployment, i.e.,

Okun’s coefficient. The underlined numbers are the statistically significant

ones, referring to a 95% confidence interval. In all tables, confidence inter-

vals reach zero at around 120%, which means that if import reaches 120%

of GDP, the GDP change does not affect unemployment.

A declining (in absolute terms) negative slope in all tables means that

with a higher percentage of import to GDP, the GDP change has a more

negligible effect on unemployment. From these results, we can conclude

that import is affecting the growth-unemployment nexus. As expected, the

higher the import level, the weaker the growth-unemployment nexus.

Export. Here we have a relatively similar situation as with import. The

assumption is that the higher export to GDP percentage, the lower the ef-

fect of GDP on unemployment. The tables are customized in the same way.

The left column shows the export percentage of GDP, and the rest columns

to the right show the effect of a one percent change in GDP on unemploy-

ment. The higher the slope coefficient (in absolute terms), the higher the

effect; the moment the confidence interval of the coefficient reaches zero,

the effect becomes insignificant.

The results suggest that similar to an import with a high export level,

GDP growth has less effect on the unemployment level. Tables 4 and 5 in

the Annex show the conditional GDP growth-unemployment nexus while

the export variable is introduced to an equation.

Equilibrium. Quarterly Journal of Economics and Economic Policy, 19(1), 59–91

Most steep slopes we see with young and uneducated (EDU0

–

2) groups

of people, similarly as in the import case. These are the two most vulnera-

ble groups, and high export limits their job availability due to the lack of

skills needed to produce export goods. To conclude, export also affects the

growth-unemployment nexus; the nexus becomes weaker with export

growth.

Inward FDI. The assumption was that high capital flows from abroad

might directly affect unemployment. Investments create jobs, which, in

turn, decrease the unemployment level. However, technical know-how can

push the market towards more capital-intensive labor. Tables 6 and 7 in the

Annex show the conditional GDP growth-unemployment nexus while the

inward FDI variable is introduced to an equation.

Overall, even though for highly educated and for females the effect was

relatively small, for unemployment as a whole the effect of iFDI to GDP

growth-unemployment nexus is unquestionable. With a sufficiently high

iFDI to GDP ratio, iFDI would become a decisive factor in reducing unem-

ployment by inducing GDP growth. Therefore, the significance of expan-

sionary policy would drop.

Outward FDI effect on the GDP to unemployment relationship. The as-

sumption was that oFDI would increase unemployment since it moves

money and workplaces elsewhere. However, since the testing subject is the

relationship between GDP growth and unemployment level, oFDI might

not affect it since both could, in theory, cancel each other. Tables 8 and 9 in

the Annex show the conditional GDP growth-unemployment nexus while

the outward FDI variable is introduced to an equation.

Looking at the group of tables as a whole, we can see that oFDI has

some degree of an effect on the GDP growth-unemployment nexus. Even

when the female unemployment and highly skilled (EDU5

–

8) unemploy-

ment group of people feel the opposite effect, the general effect is that oFDI

weakens the significance of unemployment reaction to GDP fluctuations.

The findings also suggest that the effect of FDI and trade on the growth-

unemployment nexus was the strongest during the economic decline phase

compared to the periods of growth.

Interpretations

Each FDI and trade variable affects the GDP growth-unemployment re-

lationship within a different magnitude. The old standing rule was that if

Equilibrium. Quarterly Journal of Economics and Economic Policy, 19(1), 59–91

GDP increases, unemployment should decrease. However, as presented in

the finding, this could not always be true.

While looking at import, export, iFDI, and oFDI, it is clear that, in theo-

ry, all these variables play a considerable role, GDP is affected by them,

and in most cases they sufficiently raise the GDP. In theory, this GDP in-

crease should also correspond to a reducing unemployment level effect.

However, as it is seen, with higher dependency on global trade and in-

vestment, this relationship does not work as it should. The assumptions

mostly would be that while participating in international affairs, markets

are changing as well, the globalization process plays its part, and with

money from abroad, countries also inherit more knowledge and technolog-

ical know-how or the inhouse markets becomes oversaturated with goods

from abroad and that current markets are forced to change. All of that con-

ditions a decrease in unemployment dependency on GDP fluctuations.

Validity and the limitations of the research

The research was dedicated to uncovering what effects international

economic relations might have over the deeply investigated and proven

Okun’s law. It was decided to differentiate unemployment into seven dif-

ferent categories to see the more specific results. Also, from the literature

review, it was seen that the growth-unemployment nexus might be differ-

ent through different phases of the business cycles. Therefore, the business

cycle was divided into decline and growth phases to see more differentiat-

ed results. Four variables were used to proxy international economic rela-

tions open to an investigation, and seven unemployment variables were

used to see the effect. The general tendencies were as expected, and the

results came that international economic relations weaken the growth-

unemployment nexus. If the effect was slightly different for one unem-

ployment variable or another, it was relatively small and conformed to

general tendency. Also, while combining the results for different phases of

business cycles, the tendencies were relatively similar, again suggesting the

reliability of the results.

The limitation of the research is that it was visible that the deviation of

a few countries in terms of the level of FDI (for example, Malta and Cy-

prus) is relatively high, suggesting that it might affect the results for the

whole panel. Also, due to that, confidence intervals, in some cases, ap-

peared to be very wide, influencing the efficiency of the estimated Okun’s

Equilibrium. Quarterly Journal of Economics and Economic Policy, 19(1), 59–91

coefficients. In some cases, the effect seemed to be relatively different for

certain unemployment. In such cases, the averaged results become a deci-

sive factor to reach a consensus about the effect of the variable.

Conclusion and investigation of the hypothesis

The research took long-lasting Okun’s theory to the test to see how dif-

ferently unemployment reacts to GDP fluctuation over the influence of

another variable. More importantly, Okun’s theory was presented before

the globalization peaks of this century. Therefore, it is pretty useful infor-

mation to know how international relations might affect unemployment

and GDP correlation.

The effect of FDI and trade on the growth-unemployment nexus was

measured using different unemployment variables and different phases of

the business cycle. Four different variables (import, export, inward FDI,

and outward FDI) proxy international economic relations under investiga-

tion. All of them were used to examine how international economic rela-

tions affects unemployment reaction to GDP fluctuations. Theory suggests

that international economic relations might mitigate the effect of GDP

change on unemployment, meaning that if an international economic rela-

tion intensifies, the effect of GDP on unemployment weakens.

The results suggest that in the case of an import, the growth-

unemployment relationship becomes weaker considering all seven unem-

ployment variables, suggesting that import indeed mitigates the growth-

unemployment nexus. The case of export is almost identical, suggesting

that GDP is also having a more negligible effect on unemployment if export

levels are higher. Inward FDI showed slightly different results, meaning

that the effect of iFDI growth-unemployment nexus was relatively minor

but still noticeable in all unemployment groups. The only variable that

acted a bit differently was outward FDI, since the growth-unemployment

nexus was not mitigated for all unemployment groups. Nevertheless, it did

not affect only specific groups of unemployed, and thus the general view

would still be that oFDI is also mitigating the growth-unemployment corre-

lations. The conclusion would be that the hypothesis is confirmed.

Equilibrium. Quarterly Journal of Economics and Economic Policy, 19(1), 59–91

Discussion

Generally, the result provided information that growth-unemployment

nexus is affected by all four variables of international economic relations

under testing. Taking a closer look at imports, the slopes were steepest for

youths and uneducated people (EDU0–2). This means that import has the

most drastic effect on these two groups of unemployed. It is relatively un-

derstandable, since both groups mainly represent similar people. Suppose

the majority of goods come from imports. In that case, these two groups are

the ones that suffer, since there is a probability that those low-level jobs

that young or uneducated people are targeting would no longer exist with

such a level of import. The results are in line with Mohler et al. (2018), who

found that import has a significant effect on the probability of becoming

unemployed in the case of low-skilled workers, as well as the results of

Gonese et al. (2023), who proved the existence of a positive effect of import

on unemployment. It should be noted, however, that these studies did not

distinguish unemployment according to specific categories. The results of

this study also suggest that if the import to GDP level is higher, the lower

effect of growth on unemployment, and if the economy reaches 120% of

import-to-GDP, the effect of growth on unemployment becomes insignifi-

cant. In this scenario, the country would most likely be fully saturated with

imported goods, and unemployment would be high, but it would not be

connected to output change. In the scientific literature, the effect of import

on growth is defined as positive (e.g. Kim et al., 2007), negative (e.g. Altaee

et al., 2016), or no relationship between import and growth (e.g. Ebrahimi,

2017; Sarker, 2024).

Export also weakens the effect of the GDP growth-unemployment nex-

us. In most cases, confidence intervals of the effects reach zero with a 150%

export-to-GDP ratio, meaning the unemployment-to-GDP growth relation-

ship becomes insignificant when export reaches 150% of GDP. Okun’s coef-

ficients for the youth and highly educated (EDU5

–

8) are even more sensi-

tive to the export, meaning their growth-unemployment relationship be-

comes insignificant when the export reaches 120% of GDP. It could be ex-

plained that with a higher and higher export ratio, young people also tend

to lose their market cap since they cannot produce exportable goods. How-

ever, the situation is different with a highly educated (EDU5

–

8) group of

people. Since unemployment of highly educated people is low, high ex-

ports weaken the GDP effect on unemployment not as significant as other

Equilibrium. Quarterly Journal of Economics and Economic Policy, 19(1), 59–91

educational attainment level groups. In the scientific literature, the effect of

export on growth is not straightforward, as, for example, Bakari and Ma-

brouki (2017) found no effect of export on growth, Kaur et al. (2017) found

a bidirectional causality between export and GDP, and Sarker (2024)

proved the existence of positive effect. With regard to unemployment,

Gonese et al. (2023) proved the existence of a negative effect of export on

unemployment in the long run.

Considering the inward FDI, it is visible that the slopes representing

Okun’s coefficients are directed toward the positive side. This means that,

similarly to import and export, if the country receives a high level of iFDI,

the GDP growth-unemployment correlation is weakened. Overall, iFDI

conditions the relationship between GDP growth and unemployment,

which becomes insignificant at approximately 800%, meaning that if iFDI-

to-GDP is 800% or more, GDP growth no longer affects the unemployment

level. Of course, this high level of FDI is not usual and is common primari-

ly to small countries. However, the pattern that the higher the iFDI, the

lower the impact growth has on unemployment is visible. The highest im-

pact was visible in groups of young and uneducated (EDU0

–

2) people,

similarly as with import and export. The lowest impact of iFDI was for

female and highly educated unemployment. This outcome was not unex-

pected, since young and uneducated people often belong to a similar sam-

ple and their unemployment levels are volatile. Since iFDI, in most cases,

would require employees with higher experience, economic growth would

not make such a big difference for young and uneducated people. Since the

unemployment of females and highly educated are not fragile, iFDI would

make a small change since the demand for this type of labor would hardly

be affected. Discussions in the scientific literature mainly refer to a positive

effect of iFDI on growth (e.g. Marasco et al., 2023; Fazaalloh, 2024, and

Sarker, 2024). The findings of Mwakabungu and Kauangal (2023) research

reveal a positive and statistically significant unidirectional causality from

FDI inflows to economic growth. Regarding unemployment, the negative

effect of iFDI on unemployment is defined by Alfalih (2024), etc.

Lastly, the results show that the outward FDI has a minor effect on the

GDP growth-unemployment nexus as a whole. In a hypothetical situation,

the growth loses impact on unemployment at approximately 700–1000% of

oFDI-to-GDP. However, this situation is highly hypothetical, since the con-

fidence intervals are relatively wide. The interesting findings are with fe-

male unemployment and especially with the highly educated people un-

Equilibrium. Quarterly Journal of Economics and Economic Policy, 19(1), 59–91

employment. The slope representing Okun’s coefficients for the female is

going downwards. It is barely visible. However, it means that with every

additional oFDI percentage point, at least for female unemployment, the

growth effect on unemployment is increasing. The slope also goes down-

wards for highly educated people and is relatively more visible. The as-

sumption could be that with a high level of oFDI the money and highly

skilled specialists are “exported.” Therefore, the GDP growth-

unemployment relationship becomes more significant. In comparison, the

results of the research by Kim et al. (2020) proved the existence of a nega-

tive relationship between output and unemployment due to the impact of

FDI on growth.

Conclusions

The paper aimed to deepen the analysis of Okun’s law. GDP and unem-

ployment are negatively correlated, meaning if GDP grows, the unem-

ployment level should decline and vice versa. Nowadays, and especially in

the face of challenges that we recently faced, forced countries to move to-

wards globalization even more, and the international economic relations

that some time ago could have been considered as an added benefit to the

economy now could potentially be one of the factors that could affect

growth-unemployment nexus. The analyzed articles allowed us to hypoth-

esize that international economic relations such as import, export, and in-

ward and outward FDI could weaken this.

The result suggests that import mitigates the effect of GDP growth on

unemployment, and with a substantial import level, the nexus becomes

statistically insignificant. The same is true considering exports, where in-

creasing exports mitigates the growth-unemployment relationship. Inward

and outward FDI also weakens the nexus, however, only with a substan-

tially high inward or outward FDI it becomes statistically insignificant.

The results also suggest that socio-demographical factors play an im-

portant role as well. In most cases, it was found that the negative effect of

international economic relationships stays with either young or inferior

educated employees.

The research could be a foundation for sectoral strategic policies to par-

ticipate in the global market, while at the same time fostering the workforce

and promoting growth in their economy. FDI incentive programs could be

Equilibrium. Quarterly Journal of Economics and Economic Policy, 19(1), 59–91

adjusted, since it is visible the FDI affects the economy and policies could

be tailored in a way to attract FDI in the right areas where the labor is ca-

pable of fitting in and using the potential it offers. Trade liberalization top-

ics might be discussed, and policies adjusted knowing trade effect on the

nexus and balance should be found, while having a healthy openness to

trade ratio versus the domestic market and jobs protection. Lastly, labor

policy decisions should be shaped according to global needs. The focus

should shift to providing the workforce with the tools and knowledge to be

competitive in a global market.

The conducted study has limitations. The results reveal that the devia-

tion of some countries in some specific situations is quite large, which may

affect the result for the whole panel. In addition, the confidence intervals in

some cases appeared to be wide, which affected the overall efficiency of the

estimated composite slope coefficients. In some cases, the effects of certain

groups of unemployed appeared quite different, and to reach a consensus

about the effects, the averaged results became the deciding factor. Moreo-

ver, the paper does not incorporate labor policies, or technological ad-

vancements that may affect the nexus, since it is a crucial factor in the abil-

ity of the workforce to be able to be positively affected by it. The data ana-

lyzed only in EU-28 countries therefore the ability to apply the result might

be limited due to lack of data in other regions.

A suggestion for further analysis would be to analyze each country’s

political and institutional environment to understand the effect of interna-

tional economic relations on the growth-unemployment nexus more deeply

and what policies might mitigate or increase the effect of it. We believe that

institutions and policies might shape the effect that trade or FDI has on the

domestic markets and thus on the GDP growth-unemployment nexus.

Also, similar investigation should be executed throughout the entire world

economy as a whole to see and be able to apply the results globally.

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Annex

Table 1. Descriptive statistics of the analysed variables

Variables Mean Median St. deviation Min Max

Total unemployment, % 5.420 4.800 2.667 1.300 17.300

Male unemployment, % 5.830 5.000 2.976 1.200 18.400

Female unemployment, % 5.036 4.500 2.518 1.400 16.200

Youth unemployment, % 19.760 18.300 9.704 4.400 58.300

Unemployment EDU0-2, % 15.000 12.700 8.541 2.500 53.300

Unemployment EDU3-4, % 8.785 7.600 4.909 1.400 31.200

Unemployment EDU5-8, % 4.854 4.200 2.846 1.000 20.400

GDP growth, % 2.507 2.546 3.423 -14.810 25.160

FDI inward, % to GDP 125.700 44.590 313.600 9.092 1961.000

FDI outward, % to GDP 90.390 26.510 245.900 0.156 2066.000

Import, % to GDP 56.02 49.03 28.61 13.84 197.3

Export, % to GDP 58.28 49.72 34.69 11.91 238.2

Note: Unemployment variables are expressed in a per cent out of that category’s total sample; EDU0-2

means uneducated people, EDU3-4 – average educated people and EDU5-8 – highly educated people.

Table 2. Effect of import on growth-unemployment nexus over the phase of

economic decline

Import to

GDP, %

Okun’s coefficient (composite slope)

TU YU MU FU EDU1-2 EDU3-4 EDU5-8

13 -0.373 -1.148 -0.469 -0.285 -0.717 -0.712 -0.353

23 -0.362 -1.112 -0.461 -0.271 -0.750 -0.691 -0.332

33 -0.351 -1.075 -0.454 -0.256 -0.784 -0.670 -0.311

43 -0.340 -1.039 -0.447 -0.242 -0.818 -0.649 -0.289

53 -0.329 -1.002 -0.439 -0.228 -0.851 -0.628 -0.268

63 -0.319 -0.966 -0.432 -0.214 -0.885 -0.607 -0.247

73 -0.308 -0.930 -0.425 -0.199 -0.919 -0.587 -0.225

83 -0.297 -0.893 -0.417 -0.185 -0.952 -0.566 -0.204

93 -0.286 -0.857 -0.410 -0.171 -0.986 -0.545 -0.183

103 -0.275 -0.820 -0.403 -0.157 -1.020 -0.524 -0.161

113 -0.264 -0.784 -0.396 -0.142 -1.054 -0.503 -0.140

123 -0.253 -0.747 -0.388 -0.128 -1.087 -0.482 -0.118

133 -0.243 -0.711 -0.381 -0.114 -1.121 -0.461 -0.097

143 -0.232 -0.674 -0.374 -0.100 -1.155 -0.440 -0.076

153 -0.221 -0.638 -0.366 -0.086 -1.188 -0.419 -0.054

163 -0.210 -0.602 -0.359 -0.071 -1.222 -0.398 -0.033

173 -0.199 -0.565 -0.352 -0.057 -1.256 -0.377 -0.012

183 -0.188 -0.529 -0.344 -0.043 -1.289 -0.356 0.010

193 -0.178 -0.492 -0.337 -0.029 -1.323 -0.335 0.031

203 -0.167 -0.456 -0.330 -0.014 -1.357 -0.315 0.052

Note: underlined coefficients indicate at least 5% statistical significance of growth-unemployment nexus.

Table 3. Effect of import on growth-unemployment nexus over the phase of

economic growth

Import to GDP, % Okun’s coefficient (composite slope)

TU YU MU FU EDU1-2 EDU3-4 EDU5-8

13 -0.165 -0.457 -0.201 -0.136 -0.306 -0.297 0.049

23 -0.154 -0.424 -0.188 -0.127 -0.289 -0.279 0.045

33 -0.144 -0.392 -0.175 -0.118 -0.271 -0.261 0.040

43 -0.133 -0.360 -0.161 -0.109 -0.254 -0.242 0.036

53 -0.123 -0.328 -0.148 -0.101 -0.236 -0.224 0.032

63 -0.112 -0.295 -0.134 -0.092 -0.219 -0.206 0.027

73 -0.101 -0.263 -0.121 -0.083 -0.201 -0.188 0.023

83 -0.091 -0.231 -0.108 -0.075 -0.183 -0.169 0.019

93 -0.080 -0.199 -0.094 -0.066 -0.166 -0.151 0.015

103 -0.070 -0.166 -0.081 -0.057 -0.148 -0.133 0.010

113 -0.059 -0.134 -0.068 -0.049 -0.131 -0.115 0.006

123 -0.048 -0.102 -0.054 -0.040 -0.113 -0.096 0.002

133 -0.038 -0.070 -0.041 -0.031 -0.096 -0.078 -0.003

143 -0.027 -0.037 -0.028 -0.022 -0.078 -0.060 -0.007

153 -0.017 -0.005 -0.014 -0.014 -0.061 -0.042 -0.011

163 -0.006 0.027 -0.001 -0.005 -0.043 -0.023 -0.016

173 0.005 0.059 0.012 0.004 -0.025 -0.005 -0.020

183 0.015 0.092 0.026 0.012 -0.008 0.013 -0.024

193 0.026 0.124 0.039 0.021 0.010 0.031 -0.028

203 0.036 0.156 0.052 0.030 0.027 0.050 -0.033

Note: underlined coefficients indicate at least 5% statistical significance of growth-unemployment nexus.

Table 4. Effect of export on growth-unemployment nexus over the phase of

economic decline

Export to GDP, % Okun’s coefficient (composite slope)

TU YU MU FU EDU1-2 EDU3-4 EDU5-8

13 -0.354 -1.112 -0.446 -0.269 -0.727 -0.692 -0.318

23 -0.348 -1.083 -0.444 -0.258 -0.759 -0.676 -0.305

33 -0.341 -1.055 -0.442 -0.247 -0.791 -0.659 -0.292

43 -0.335 -1.026 -0.440 -0.237 -0.822 -0.643 -0.279

53 -0.328 -0.998 -0.438 -0.226 -0.854 -0.626 -0.265

63 -0.322 -0.970 -0.436 -0.216 -0.886 -0.610 -0.252

73 -0.315 -0.941 -0.434 -0.205 -0.917 -0.593 -0.239

83 -0.309 -0.913 -0.432 -0.195 -0.949 -0.577 -0.226

93 -0.302 -0.884 -0.430 -0.184 -0.981 -0.560 -0.213

103 -0.296 -0.856 -0.428 -0.173 -1.013 -0.544 -0.200

113 -0.289 -0.827 -0.426 -0.163 -1.044 -0.527 -0.186

123 -0.283 -0.799 -0.424 -0.152 -1.076 -0.511 -0.173

133 -0.276 -0.771 -0.423 -0.142 -1.108 -0.494 -0.160

143 -0.270 -0.742 -0.421 -0.131 -1.139 -0.478 -0.147

153 -0.263 -0.714 -0.419 -0.120 -1.171 -0.461 -0.134

163 -0.257 -0.685 -0.417 -0.110 -1.203 -0.445 -0.121

173 -0.251 -0.657 -0.415 -0.099 -1.235 -0.428 -0.107

183 -0.244 -0.628 -0.413 -0.089 -1.266 -0.412 -0.094

Table 4. Continued

Export to GDP, % Okun’s coefficient (composite slope)

TU YU MU FU EDU1-2 EDU3-4 EDU5-8

193 -0.238 -0.600 -0.411 -0.078 -1.298 -0.395 -0.081

203 -0.231 -0.572 -0.409 -0.068 -1.330 -0.378 -0.068

213 -0.225 -0.543 -0.407 -0.057 -1.361 -0.362 -0.055

223 -0.218 -0.515 -0.405 -0.046 -1.393 -0.345 -0.042

233 -0.212 -0.486 -0.403 -0.036 -1.425 -0.329 -0.028

243 -0.205 -0.458 -0.401 -0.025 -1.457 -0.312 -0.015

Note: underlined coefficients indicate at least 5% statistical significance of growth-unemployment nexus.

Table 5. Effect of export on growth-unemployment nexus over the phase of

economic growth

Export to GDP, % Okun’s coefficient (composite slope)

TU YU MU FU EDU1-2 EDU3-4 EDU5-8

13 -0.157 -0.439 -0.192 -0.127 -0.310 -0.281 -0.139

23 -0.148 -0.412 -0.181 -0.120 -0.293 -0.267 -0.130

33 -0.140 -0.385 -0.170 -0.114 -0.277 -0.253 -0.121

43 -0.131 -0.359 -0.159 -0.107 -0.261 -0.238 -0.111

53 -0.123 -0.332 -0.149 -0.100 -0.245 -0.224 -0.102

63 -0.114 -0.305 -0.138 -0.094 -0.228 -0.210 -0.093

73 -0.106 -0.278 -0.127 -0.087 -0.212 -0.196 -0.084

83 -0.098 -0.251 -0.116 -0.080 -0.196 -0.182 -0.075

93 -0.089 -0.225 -0.106 -0.074 -0.179 -0.168 -0.065

103 -0.081 -0.198 -0.095 -0.067 -0.163 -0.154 -0.056

113 -0.072 -0.171 -0.084 -0.060 -0.147 -0.139 -0.047

123 -0.064 -0.144 -0.073 -0.054 -0.130 -0.125 -0.038

133 -0.055 -0.118 -0.062 -0.047 -0.114 -0.111 -0.029

143 -0.047 -0.091 -0.052 -0.040 -0.098 -0.097 -0.020

153 -0.039 -0.064 -0.041 -0.033 -0.081 -0.083 -0.010

163 -0.030 -0.037 -0.030 -0.027 -0.065 -0.069 -0.001

173 -0.022 -0.011 -0.019 -0.020 -0.049 -0.055 0.008

183 -0.013 0.016 -0.008 -0.013 -0.033 -0.041 0.017

193 -0.005 0.043 0.002 -0.007 -0.016 -0.026 0.026

203 0.004 0.070 0.013 0.000 0.000 -0.012 0.035

213 0.012 0.096 0.024 0.007 0.016 0.002 0.045

223 0.020 0.123 0.035 0.013 0.033 0.016 0.054

233 0.029 0.150 0.046 0.020 0.049 0.030 0.063

243 0.037 0.177 0.056 0.027 0.065 0.044 0.072

Note: underlined coefficients indicate at least 5% statistical significance of growth-unemployment nexus.

Table 6. Effect of inward FDI on growth-unemployment nexus over the phase of

economic decline

iFDI to GDP, % Okun’s coefficient (composite slope)

TU YU MU FU EDU1-2 EDU3-4 EDU5-8

9 -0.314 -0.934 -0.423 -0.213 -0.823 -0.606 -0.249

99 -0.302 -0.884 -0.411 -0.202 -0.798 -0.590 -0.265

189 -0.291 -0.835 -0.399 -0.192 -0.774 -0.574 -0.281

279 -0.280 -0.785 -0.387 -0.181 -0.750 -0.559 -0.297

369 -0.268 -0.735 -0.375 -0.170 -0.725 -0.543 -0.313

459 -0.257 -0.685 -0.363 -0.160 -0.701 -0.527 -0.329

549 -0.246 -0.636 -0.350 -0.149 -0.676 -0.512 -0.345

639 -0.234 -0.586 -0.338 -0.138 -0.652 -0.496 -0.361

729 -0.223 -0.536 -0.326 -0.128 -0.627 -0.481 -0.377

819 -0.211 -0.487 -0.314 -0.117 -0.603 -0.465 -0.393

909 -0.200 -0.437 -0.302 -0.107 -0.579 -0.449 -0.409

999 -0.189 -0.387 -0.290 -0.096 -0.554 -0.434 -0.424

1089 -0.177 -0.337 -0.278 -0.085 -0.530 -0.418 -0.440

1179 -0.166 -0.288 -0.266 -0.075 -0.505 -0.402 -0.456

1269 -0.154 -0.238 -0.253 -0.064 -0.481 -0.387 -0.472

1359 -0.143 -0.188 -0.241 -0.053 -0.456 -0.371 -0.488

1449 -0.132 -0.139 -0.229 -0.043 -0.432 -0.355 -0.504

1539 -0.120 -0.089 -0.217 -0.032 -0.408 -0.340 -0.520

1629 -0.109 -0.039 -0.205 -0.022 -0.383 -0.324 -0.536

1719 -0.098 0.011 -0.193 -0.011 -0.359 -0.308 -0.552

1809 -0.086 0.060 -0.181 0.000 -0.334 -0.293 -0.568

1899 -0.075 0.110 -0.169 0.010 -0.310 -0.277 -0.584

1989 -0.063 0.160 -0.156 0.021 -0.286 -0.261 -0.600

Note: underlined coefficients indicate at least 5% statistical significance of growth-unemployment nexus.

Table 7. Effect of inward FDI on growth-unemployment nexus over the phase of

economic growth

iFDI to GDP, % Okun’s coefficient (composite slope)

TU YU MU FU EDU1-2 EDU3-4 EDU5-8

9 -0.115 -0.319 -0.138 -0.095 -0.253 -0.211 -0.087

99 -0.107 -0.284 -0.129 -0.088 -0.231 -0.196 -0.093

189 -0.099 -0.249 -0.119 -0.081 -0.210 -0.180 -0.099

279 -0.091 -0.214 -0.109 -0.074 -0.188 -0.165 -0.105

369 -0.083 -0.179 -0.100 -0.068 -0.166 -0.149 -0.111

459 -0.075 -0.144 -0.090 -0.061 -0.145 -0.134 -0.117

549 -0.067 -0.109 -0.080 -0.054 -0.123 -0.119 -0.123

639 -0.059 -0.074 -0.071 -0.047 -0.102 -0.103 -0.129

729 -0.051 -0.039 -0.061 -0.040 -0.080 -0.088 -0.134

819 -0.043 -0.004 -0.051 -0.034 -0.058 -0.072 -0.140

909 -0.035 0.031 -0.042 -0.027 -0.037 -0.057 -0.146

999 -0.027 0.066 -0.032 -0.020 -0.015 -0.042 -0.152

1089 -0.019 0.101 -0.022 -0.013 0.007 -0.026 -0.158

1179 -0.011 0.136 -0.013 -0.006 0.028 -0.011 -0.164

1269 -0.003 0.171 -0.003 0.000 0.050 0.005 -0.170

1359 0.005 0.206 0.007 0.007 0.072 0.020 -0.176

1449 0.013 0.241 0.016 0.014 0.093 0.035 -0.182

Table 7. Continued

iFDI to GDP, % Okun’s coefficient (composite slope)

TU YU MU FU EDU1-2 EDU3-4 EDU5-8

1539 0.021 0.276 0.026 0.021 0.115 0.051 -0.188

1629 0.029 0.311 0.036 0.027 0.136 0.066 -0.194

1719 0.037 0.346 0.045 0.034 0.158 0.081 -0.199

1809 0.045 0.381 0.055 0.041 0.180 0.097 -0.205

1899 0.053 0.416 0.065 0.048 0.201 0.112 -0.211

1989 0.061 0.451 0.074 0.055 0.223 0.128 -0.217

Note: underlined coefficients indicate at least 5% statistical significance of growth-unemployment nexus.

Table 8. Effect of outward FDI on growth-unemployment nexus over the phase of

economic decline

oFDI to GDP,% Okun’s coefficient (composite slope)

TU YU MU FU EDU1-2 EDU3-4 EDU5-8

1 -0.318 -0.951 -0.429 -0.216 -0.835 -0.616 -0.251

101 -0.331 -0.891 -0.442 -0.229 -0.861 -0.629 -0.270

201 -0.344 -0.831 -0.455 -0.242 -0.887 -0.643 -0.289

301 -0.357 -0.772 -0.468 -0.255 -0.913 -0.657 -0.308

401 -0.371 -0.712 -0.481 -0.268 -0.939 -0.671 -0.327

501 -0.384 -0.652 -0.495 -0.280 -0.965 -0.685 -0.346

601 -0.397 -0.592 -0.508 -0.293 -0.991 -0.699 -0.365

701 -0.410 -0.532 -0.521 -0.306 -1.016 -0.712 -0.384

801 -0.423 -0.472 -0.534 -0.319 -1.042 -0.726 -0.403

901 -0.436 -0.412 -0.547 -0.332 -1.068 -0.740 -0.422

1001 -0.449 -0.352 -0.560 -0.344 -1.094 -0.754 -0.441

1101 -0.462 -0.292 -0.573 -0.357 -1.120 -0.768 -0.460

1201 -0.475 -0.232 -0.587 -0.370 -1.146 -0.782 -0.479

1301 -0.488 -0.172 -0.600 -0.383 -1.172 -0.795 -0.498

1401 -0.501 -0.113 -0.613 -0.396 -1.198 -0.809 -0.517

1501 -0.514 -0.053 -0.626 -0.408 -1.224 -0.823 -0.536

1601 -0.527 0.007 -0.639 -0.421 -1.250 -0.837 -0.555

1701 -0.540 0.067 -0.652 -0.434 -1.276 -0.851 -0.574

1801 -0.553 0.127 -0.666 -0.447 -1.302 -0.865 -0.593

1901 -0.566 0.187 -0.679 -0.460 -1.328 -0.879 -0.612

2001 -0.579 0.247 -0.692 -0.472 -1.354 -0.892 -0.631

2101 -0.592 0.307 -0.705 -0.485 -1.380 -0.906 -0.650

Note: underlined coefficients indicate at least 5% statistical significance of growth-unemployment nexus.

Table 9. Effect of outward FDI on growth-unemployment nexus over the phase of

economic growth

oFDI to GDP,% Okun’s coefficient (composite slope)

TU YU MU FU EDU1-2 EDU3-4 EDU5-8

1 -0.1081 -0.3076 -0.1299 -0.0892 -0.2402 -0.1942 -0.0783

101 -0.0996 -0.2607 -0.1203 -0.0969 -0.2135 -0.1806 -0.0733

201 -0.0911 -0.2137 -0.1107 -0.1047 -0.1868 -0.1671 -0.0684

301 -0.0826 -0.1668 -0.1011 -0.1124 -0.1601 -0.1535 -0.0634

401 -0.0741 -0.1199 -0.0915 -0.1202 -0.1334 -0.1399 -0.0584

501 -0.0656 -0.0730 -0.0819 -0.1279 -0.1067 -0.1264 -0.0534

601 -0.0571 -0.0260 -0.0723 -0.1357 -0.0801 -0.1128 -0.0484

701 -0.0486 0.0209 -0.0627 -0.1435 -0.0534 -0.0992 -0.0434

801 -0.0401 0.0678 -0.0531 -0.1512 -0.0267 -0.0857 -0.0385

901 -0.0316 0.1148 -0.0435 -0.1590 0.0000 -0.0721 -0.0335

1001 -0.0231 0.1617 -0.0338 -0.1667 0.0267 -0.0585 -0.0285

1101 -0.0146 0.2086 -0.0242 -0.1745 0.0534 -0.0450 -0.0235

1201 -0.0061 0.2555 -0.0146 -0.1822 0.0801 -0.0314 -0.0185

1301 0.0024 0.3025 -0.0050 -0.1900 0.1068 -0.0178 -0.0135

1401 0.0109 0.3494 0.0046 -0.1977 0.1335 -0.0043 -0.0086

1501 0.0194 0.3963 0.0142 -0.2055 0.1601 0.0093 -0.0036

1601 0.0279 0.4432 0.0238 -0.2132 0.1868 0.0229 0.0014

1701 0.0364 0.4902 0.0334 -0.2210 0.2135 0.0364 0.0064

1801 0.0449 0.5371 0.0430 -0.2287 0.2402 0.0500 0.0114

1901 0.0534 0.5840 0.0526 -0.2365 0.2669 0.0636 0.0164

2001 0.0619 0.6310 0.0622 -0.2442 0.2936 0.0771 0.0213

2101 0.0704 0.6779 0.0718 -0.2520 0.3203 0.0907 0.0263

Note: underlined coefficients indicate at least 5% statistical significance of growth-unemployment nexus.

Economic growth and national security: Patterns of European countries’ resistance to global turbulences

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Rethinking the fiscal policy in post Covid-19 times in Mexico.

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ABSTRACTResearch background: The global economy has experienced one of the most economic and financial crisis in almost 90 years. The Real Gross Domestic Product (GDP) of both developed and emerging economies are shrank by –5.8% and –3.3% respectively caused by the Covid-19 pandemic (IMF: 2020). The Covid pandemic crisis has led a severe economic stagnation throughout the world but also to the Mexican economy, two million of jobs have been lost, and the (GDP) shrank 8.2% in 2020 and countless people have been plunged back into extreme poverty. For many economists, the Covid-19 could lead to a lost decade for development. Mexico’s fiscal space has not been effective in reducing the negative effects mentioned above.Purpose of the article: The main purpose of this paper is to rethink the Mexican fiscal policy through the MMT as an important tool to creating and maintaining prosperity.Methods: this research is mainly focus on documents about the descriptive statistical characteristics. Some cited documents on the Modern Money Theory from high impact factor journals will be considered. Data and information providing by international organizations such as the International Monetary Fund, World Bank to name a few will play a crucial role in this research.Findings & value added: Following the negative effects and consequences of Covid-19 on the Mexican economy, this research found that the Modern Money Theory (MMT) is useful as a government policy in post Covid-19. Furthermore, the MMT is a direct response to the pandemic by boosting the aggregate demand and job creation in the Mexican economy. In addition, the MMT can also mitigate the resulting tension between the impact of external shock caused by the pandemic and product-market demand.

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The relationship between trade openness and unemployment in Southern African Development Community (SADC) countries remains an area of significant interest and concern. While trade openness is often advocated for fostering economic growth and development, its potential effects on employment outcomes are complex and multifaceted. Understanding the nature and nuances of this relationship within the SADC region is crucial for policymakers and stakeholders seeking to design effective strategies that balance the benefits of trade openness with the goals of reducing unemployment and promoting inclusive growth. This study evaluates the effect of trade openness on unemployment in SADC from 1980 to 2019 using panel ARDL (pooled mean group—PMG) estimation techniques. The findings of the study show that trade openness and exports negatively impact unemployment, whereas imports positively affect unemployment in the long run. This suggests that while boosting exports and real trade, openness decreases unemployment, and imports increase job losses in the long run in the SADC region. This calls for more caution on trade openness regarding what to export and import when addressing regional unemployment reduction policies.

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This study examines causal relationship between foreign direct investment (FDI) inflows and economic growth in Tanzania during 1990–2020. As financial development and trade were not incorporated in extant studies, we included them as intermediate variables because of their intermediation role in this study. FDI inflow is considered an important economic growth catalyst in developing economies. Neoclassical growth theories claim that it enhances economic growth by augmenting capital stock and technology. According to the neoclassical theories, FDI does not enhance the long-run growth rate but instead is related to the level of output. However, empirical evidence is rather mixed, with some supporting the neoclassical theoretical views on economic growth, while others opposing them. We employ the autoregressive distributed lag model and Granger causality tests to analyze the relationship. The results indicate that there exists a long-run relationship among the variables under considerations in Tanzania. Furthermore, the finding reveals positive and statistically significant unidirectional causality running from FDI inflow to economic growth in Tanzania in the long and short run. Hence, we conclude that Tanzania should emphasize FDI-led growth policies to enhance economic growth to realize the desired economic objectives.

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The theoretical literature on the FDI-growth relationship suggests that FDI with high technological content might play a peculiar role. To investigate the existence and magnitude of this peculiar effect, we collected data for 28 countries over the period 1989 to 2019 and used GMM techniques for empirical estimation. We employed the U.N. International Standard Classification (ISIC) Revision 3 to classify FDI data and follow the criteria laid down by the Organization for Economic Cooperation and Development (OECD) to distinguish FDI data by technological content. The empirical findings of this article confirm that technology plays an important role in determining the FDI-Growth relationship. Interestingly, the empirical evidence supports a U-shaped relationship between FDI and economic growth when FDI is disaggregated by different technological contents. More specifically, we find strong evidence that in the manufacturing sector, FDI with a higher technological content exhibits a positive association with growth in the host country. We also find evidence pointing towards a positive relationship between FDI and growth in the host country at the other end of the technology spectrum (low-tech). Further investigation confirms the robustness of these findings across different estimation techniques as well as across different sampling strategies.

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Research background: The current health crisis, which began to take shape in mid-March 2020 due to the massive spread of the coronavirus SARS-CoV-2, has shaped the face of the Slovak labour market the most. Slovakia, similarly, to other countries in the world, has operated with several non-pharmaceutical anti-pandemic measures taken by the government to reduce the spread of the virus or reverse adverse developments. On the other hand, these measures have frozen production, and business activities of companies annulled not only the number of physical meetings with business collaborators but also business contracts themselves. Consequently, the demand for new labour has decreased, and in many cases, redundancies have occurred. Purpose of the article: The study aims to develop a comprehensive and detailed analysis of unemployment and its development in Slovakia, during the 1st and 2nd wave of the Covid-19 pandemic, determine the extent to which the anti-pandemic measures have affected the Slovak labour market, and identify the most affected groups of unemployed. Methods: To analyze the impact of the anti-pandemic measures on the unemployment situation in Slovakia, we applied the approach where the statistically created hypothetical state of the absence of the pandemic was compared with the real state as the consequence of the pandemic. The hypothetical state was modelled by the autoregressive 1st order or one-dimensional time series model with a linear trend and seasonability. Findings & value added: The results of the analysis identify the groups of the population, mostly affected by the Covid-19 pandemic together with the quantification of the impact on unemployment. The findings of quantification of the impact of the Covid-19 crisis on the Slovak labour market can be further used in creating targeted measures aimed at supporting unemployed individuals or at the sustainability of already existing jobs and in other governmental economic and social decisions.

Growth - youth unemployment nexus in upper-middle-income countries in sub-Saharan Africa

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The article examined the nexus between youth unemployment and output growth in upper-middle-income countries in Sub-Saharan Africa. The statistics from the study revealed that the average GDP growth rate for the countries was 6.36%, while the average youth unemployment was 32.3%. From among the countries, Equatorial Guinea had the lowest youth unemployment with 11.69% while the highest was found in South Africa with 47.3%. the highest GDP growth rate was found in Gabon with 21.01% while South Africa had the lowest GDP growth rate. On the whole, the result revealed that there exist a long run positive and significant relationship between youth unemployment and GDP growth rate in the selected countries thereby negating the postulations of Okun's law. This is an indication that the growth experienced in these countries is non-inclusive growth.

Economic growth and labour market in the European Union: lessons from COVID-19

Article

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Andrej Privara

Research background: The world has been fighting the new pandemic caused by COVID-19 since March 2020. The subsequent restrictions on economic activity resulted in a supply shock, accompanied by a supply chain disruption, job layoffs, reduced work time and wages and decreased disposable incomes and taxes, which led to a demand shock. However, whether a close link exists between the number of confirmed cases, deaths and economic indicators during the COVID-19 pandemic remains uncertain. Purpose of the article: The current study aims to analyse the impact of the number of infections and deaths on economic growth and labour market indicators in the member states of the European Union. Methods: To achieve the main research goal, we conduct a panel data analysis on the quarterly data of 2020. Specifically, we developed three random-effects panel data econometric models to estimate the significance of infection and mortality rates for economic growth as well as employment and unemployment rates. Findings & value added: This study contributes to the existing literature by analysing the link between the infection and mortality rates of COVID-19 and selecting macro-economic indicators within the European Union. The results show that the infection rate is not a significant variable for economic growth and labour market indicators. However, an increase in the number of confirmed deaths has a significantly negative impact on the economy. Moreover, an increase in the mortality rate has a worse impact on the labour market than on economic growth in general. These results can serve as a theoretical basis for future research on the interconnections between pandemics and macro-economic indicators. The findings can also contribute to developing efficient policy instruments for mitigating the negative impact of pandemics in the future, thereby ensuring the cooperation of fiscal, monetary and health policy authorities.