Post-recession US Employment through the Lens of a Non-linear Okun's law

Chinn, Menzie David; Ferrara, Laurent; Mignon, Valérie

doi:10.3386/w19047

Cited by 7 publications

(5 citation statements)

References 29 publications

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“…6. Relationship between unemployment and growth in Okun law in the sort run and long run had been studied by Shin et al (2014) and Chinn et al (2013), and they found ( by using cointegration models) that the short and long run dynamics could be unequal. However, Knotek (2007) found a substantial variation in the relation between unemployment rate and real GDP growth in the short run, that is, he found that there is not always a negative relationship between unemployment and output growth in the short run.…”

Section: Summary Of Some Empirical Studiesmentioning

confidence: 99%

A Proposed Model for Okun Law in the Short-Run and Long-Run the Case of Egypt (1982-2018)

Elsayed¹

2020

IJSSER

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The paper aims to study the dynamic interaction between GDP growth rate and unemployment rate, or unemployment rate responsiveness to changes in GDP growth rate. Using a set of Egyptian data (from 1982 to 2018), error correction model, and production function version of Okun law. The paper adds to empirical evidence that the relationship is clearer between growth rate and employment than between growth rate and unemployment, in other words concept of Okun's law is linear between employment and GDP growth and not linear between unemployment and GDP growth. The long run coefficient shows (other things remain constant) that, 1% GDP growth rate more than 1.472%, is associated with 1.17% change in the employment rate in the same direction. At the same time, the short run coefficient shows (other things remain constant) that, 1% GDP growth rate more than 2.564%, associated with 0.961% change in the employment rate in the same direction. The value of this finding is that it helps policymakers to understand the mutual independence between Okun law variables and the way they interact.

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Section: Summary Of Some Empirical Studiesmentioning

confidence: 99%

A Proposed Model for Okun Law in the Short-Run and Long-Run the Case of Egypt (1982-2018)

Elsayed¹

2020

IJSSER

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“…Cheng et al (2015) also provide evidence of steepening of the coefficient using non-parametric Bayesian techniques. Chinn et al (2013) apply a sophisticated non-linear econometric model (a smooth transition error-correction model) to log-changes in US employment and GDP. Their results point to a jobless recovery, in contrast to the results of Ball et al (2013), with cyclical factors unable to account for around a quarter of total job losses.…”

Section: Recent Workmentioning

confidence: 99%

Labour Market Modelling in the Light of the Financial Crisis

et al. 2016

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This paper revisits the empirical relationship between unemployment and output, and its evolution following the financial crisis of 2008, with the aim of drawing potential consequences for labour market modelling strategies in place within the European System of Central Banks (ESCB). First, the negative correlation between output and unemployment (Okun's law) at cyclical frequencies is found to be a robust feature of macro data across time, countries and identification schemes. Focusing on the euro area, the financial distress seems to have altered the dynamics of output and unemployment mainly at lower frequencies, interpreted as trend developments by the statistical filters used in the analysis. Looking at the implications for modelling strategies, we propose an extension of the standard labour search and matching model in which financial frictions impinge directly on the labour market rather than on the capital market, opening the way to protracted and lagged response of employment after a "financial" crisis. In terms of policy implications, the importance of the interplay between financial and labour market frictions in trend developments should be read as strong support for an ambitious structural reform agenda in Europe, so as to make our labour (and goods) markets more flexible and resilient.

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“…For example, Shin et al (2014), proposed the NARDL in which the short and long run dynamics could be asymmetric. Chinn et al (2013), presented a smooth transition VECM with a unique long run relationship but the short run dynamics and the speed of adjustment varied over expansions and recessions. The threshold cointegration model (TVECM) that is similar to the smooth transition VECM, has been introduced by Balke and Fomby (1997).…”

Section: Introductionmentioning

confidence: 99%

Okun´s law in Colombia: a non-linear cointegration

Pulido‐Mahecha¹,

Flórez²,

Ramos-Veloza³

2018

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This paper identifies Okun´s law in Colombia between 1984 and 2016 using a Vector Error Correction Model (VECM) as there is evidence of a long-term relationship between the unemployment rate and the GDP. Results suggest that after a one percent increase in GDP, the unemployment rate is reduced by 0.45 percentage points in the long run (after sixteen quarters). In addition we inspect for nonlinearities using a threshold cointegration model (TVECM). Results suggest the existence of two regimes a low and a high one. The high regime starts at the late nineties and is associated with a more flexible labor market. Under this regime, a 1% increase in GDP, reduces the UR 0.6 percentage points after eighteen quarters. By contrast, under the low regime the response is 0.2 percentage points after eight quarters.

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Post-recession US Employment through the Lens of a Non-linear Okun's law

Cited by 7 publications

References 29 publications

A Proposed Model for Okun Law in the Short-Run and Long-Run the Case of Egypt (1982-2018)

A Proposed Model for Okun Law in the Short-Run and Long-Run the Case of Egypt (1982-2018)

Labour Market Modelling in the Light of the Financial Crisis

Okun´s law in Colombia: a non-linear cointegration

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