Does output predict unemployment? A look at Okun's law in Greece

Abstract

Using a dynamic specification of Okun's law, the authors examine the relationship between unemployment and output in Greece over the period 2000-12. While Granger causality tests indicate that real output is important to understanding future movements in unemployment, Okun's ratio is found to be 3:1, implying that a 1 per cent increase in unemployment was associated with a 3 per cent decrease in real output during the 13-year period under study. Also, asymmetric analysis shows that the response of unemployment to real output is stronger during contractions of real economic activity than in expansionary periods.

Asymmetry in the response of unemployment to output changes in Greece: Evidence from hidden co-integration

“…More specifically, it enables both the investigation of long-run relationships among non-cointegrated aggregate series and the explicit and direct analysis of the relations between positive and negative subcomponents. Our results point to the direction of an asymmetric behavior of unemployment to changes in output, in line with the evidence offered by Karfakis et al (2014). Our findings indicate that the unemployment rate responds to negative GDP shocks in the Greek economy, while the same does not hold for the case of positive GDP shocks.…”

“…In the latter, the empirical results reveal that Okun's law can be confirmed for six out of the thirteen regions of the country (examined period 1971-1993). Furthermore, the case of Greece is investigated on an aggregate level by Karfakis, Katrakilidis, and Tsanana (2014), who examine the relationship between unemployment and output in Greece over the period 2000-2012 and confirm that real output is important to understanding future movements in unemployment. More importantly, they provide evidence on the assertion that the underlying relationship depends on the state of the business cycle, since they find that the response of unemployment to real output is stronger when real economic activity contracts rather than when it expands.…”

Military Expenditures and Unemployment Nexus for Selected South Asian Countries

“…The results are consistent with the previous studies of Salman and Shukur (2014) in the context of Finland, Chowdhury and Hossain (2014) in Bangladesh, Arslan and Zaman (2014) in Pakistan, Karfakis et al (2014) in Greece, Hogrefe and Sachs (2014) in Europe etc. Similarly, FDI played a vital role to decrease unemployment rate in SAARC region, as if there is one percent increase in FDI, unemployment decreases by -0.553 %.…”

Αγορά Εργασίας Και Απασχόληση Κατά Την Περίοδο Της Οικονομικής Κρίσης Στην Ελλάδα

“…Σήμερα, για παράδειγμα, υπάρχουν περίπου 1.250.000 άνεργοι. Συμφώνα με τις προβλέψεις για μια μελλοντική σταδιακή ανάπτυξη της Ελλάδας, που προβλέπουν οι Διεθνείς Οργανισμοί -όπως το Διεθνές Νομισματικό Ταμείο -και την αλληλεπίδραση μεταξύ της ανάπτυξης και της ανεργίας (Karfakis et al, 2014) είναι πολύ πιθανόν ότι σε 2 έτη θα υπάρχουν ακόμα τουλάχιστον ένα εκατομμύριο άνεργοι. Πολλοί από αυτούς ίσως να έχουν μηδαμινές προοπτικές εύρεσης εργασίας και ίσως θα πρέπει να υπάρξει σχεδιασμός για επαγγελματική επιμόρφωση αυτών.…”