Unemployment and output nexus : testing Okun’s law for Malta

Abstract

The last twenty years have been marked by notable periods of economic uncertainty, global instability, and international upheavals. Events such as the dot-com crash and the terrorist attacks of 9/11 in 2001, the economic and financial crisis of 2008–2009, the sovereign debt crisis that followed, the COVID-19 pandemic that started in early 2020, and the ongoing conflict between Russia and Ukraine since 2022, have all had a negative impact on labour markets, albeit to varying degrees across countries. This is best exemplified by the differences in unemployment rates among European Union (EU) member states. For example, in 2022, the Czech Republic had the lowest unemployment rate in the EU (2.2%), while Spain had the highest rate (12.9%). The unemployment rate in Malta stands at 2.9%, the second lowest rate in the EU. The disparity in unemployment rates across EU countries is primarily attributed, though not limited, to differences in labour market regulations and policies, differences in the industrial structures composing the economy and the extent of labour intensity in key sectors and the economy, and variations in policy initiatives designed to counter effect negative economic shocks and firm’s response to such policies.