On the behavior of Okun's law across business cycles

Donayre, Luiggi

doi:10.1016/j.econmod.2022.105858

Cited by 19 publications

(5 citation statements)

References 59 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…We use the unemployment gap as a more precise indicator of business cycle phases, allowing us to analyze not only the elasticity differences between the growth and decline phases but also within these phases. Consistent with Oh (2018) and Donayre (2022), our research results indicate that in previous studies the commonly applied separation of two economic growth regimes (positive and negative output change) is insufficient for understanding the complex relationship between employment and output. The findings suggest that the elasticity of employment is higher when the unemployment gap is positive and increasing, regardless of the business cycle phase.…”

Section: Discussionsupporting

confidence: 82%

“…In contrast to previous research (Tang and Bethencourt 2017;Novák and Darmo 2019;Aguiar-Conraria et al 2020;Christopoulos et al 2023;Kim et al 2020), we assume that elasticity is heterogeneous over the same phase, i.e., it differs when comparing economic recovery and late expansion as well as the beginning of an economic downturn and severe depression. Moreover, we do not assume a particular number of different regimes, which is similar to previous research by Oh (2018) and Donayre (2022), and thus the specific elasticity values in each regime. On the contrary, we hypothesize (H2) that elasticity continuously changes throughout the same phase of the business cycle depending on the maturity of the business cycle phase.…”

Section: Methodsmentioning

confidence: 84%

“…In this paper we introduce a specification that makes it possible to estimate conditional elasticity, when elasticity is heterogeneous over the same phase of the business cycle. Furthermore, this study challenges the conventional approach of a fixed number of regimes and specific elasticity values in each regime, similar to the work of Oh (2018) and Donayre (2022). Instead, we propose a dynamic perspective where elasticity continuously adapts within the same business cycle phase, conditional upon the phase's maturity.…”

Section: Introductionmentioning

confidence: 95%

See 2 more Smart Citations

When and for Whom Does Growth Becomes Jobless?

Butkus,

Dargenytė-Kacilevičienė,

Matuzevičiūtė

et al. 2024

Economies

View full text Add to dashboard Cite

The results of previous research suggest that the elasticity of employment with respect to output is not constant within each phase of the business cycle and might depend on the maturity of that phase. Nevertheless, empirical evidence is almost non-existent. Using the unemployment gap as the proxy for the maturity of the business cycle phase, this paper seeks to determine heterogeneous elasticity across different business cycle phases. Furthermore, we aim to evaluate specific elasticities for separate demographic groups, considering gender, age, and educational attainment level, to identify the most vulnerable to jobless growth. Our specification is based on the employment version of Okun’s law, and estimates are provided for the whole EU-27 panel covering the period from 2000 to 2022. Our results suggest that elasticity is higher when the unemployment gap is positive and increasing and lower when the gap decreases, regardless of the business cycle phase. Thus, it can be argued that the possibility of growth increasing employment is very limited when the economy operates at its potential level (full employment) for all demographic groups.

show abstract

Section: Discussionsupporting

confidence: 82%

Section: Methodsmentioning

confidence: 84%

Section: Introductionmentioning

confidence: 95%

See 1 more Smart Citation

When and for Whom Does Growth Becomes Jobless?

Butkus,

Dargenytė-Kacilevičienė,

Matuzevičiūtė

et al. 2024

Economies

View full text Add to dashboard Cite

show abstract

“…As Okun’s law has been frequently estimated with each of the data-driven methods considered in the case study (e.g. Cuaresma 2003 ; Kim et al 2020 ; Donayre 2022 ), this practice is unlikely to change in the future. Although the veracity of estimates of Okun coefficients cannot be reasonably judged, some insights still can be said on the effect of initial modelling choices on the results.…”

Section: Discussionmentioning

confidence: 99%

How credible are Okun coefficients? The gap version of Okun’s law for G7 economies

Boďa

Považanová

2023

Econ Change Restruct

View full text Add to dashboard Cite

The paper draws attention to the fact that findings that follow from estimation of Okun’s law are extremely sensitive to methodological choices. The argument rests in a case study oriented upon G7 countries for a period 1991/Q1–2021/Q4 and accounts for a possible asymmetry in the output–unemployment relationship. First, business and unemployment fluctuations are estimated by six purely statistical approaches that arise by casting the Hodrick–Prescott filter, the Hamilton filter and the unobserved component model into a univariate or bivariate framework. Second, the gap version of Okun’s law is modelled by means of an auto-regressive distributed lag model or its nonlinear threshold counterpart according as asymmetry is allowed or not. The results indicate huge heterogeneity in Okun coefficients for every country caused by differences even in the basal methodological aspects accounted for in the case study. The diversity of results demonstrates that initial modelling choices may provide economic policy-makers with conflicting insights and advice. This issue follows merely from the absence of general standards that might decide which particular result is more credible.

show abstract

“…The assumption of constant parameters may be untenable in view of the empirical evidence claiming structural asymmetries (e.g. Cuaresma 2003;Boďa & Považanová 2021;Donayre 2022) or general temporal variability (e.g. Mussida & Zanin 2023; Porras-Arena & Martín-Román 2023) manifested in Okun equations for a variety of countries.…”

Section: A2 Reformulation Of Constant Economy-wide Okun Coefficients ...mentioning

confidence: 99%

Okun’s law in the Visegrad Group countries: its regional disaggregation and determinants

Boďa,

Považanová,

Škvor

2024

Spatial Economic Analysis

View full text Add to dashboard Cite

On the behavior of Okun's law across business cycles

Cited by 19 publications

References 59 publications

When and for Whom Does Growth Becomes Jobless?

When and for Whom Does Growth Becomes Jobless?

How credible are Okun coefficients? The gap version of Okun’s law for G7 economies

Okun’s law in the Visegrad Group countries: its regional disaggregation and determinants

Contact Info

Product

Resources

About