On the Time‐Varying Relationship between Unemployment and Output

What shapes it

Bibliographic Data

ID10493578
AuthorsJoão T Jalles (0000-0002-7171-5076, Nova School of Business and Economics, corresponding author)
Year2018
Volume66
Issue5
Pages605-630
Publication date2018-10-19
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueScottish Journal of Political Economy (JOURNAL)
Journal identifiersISSN: 0036-9292 • E-ISSN: 1467-9485
PublisherWiley (PUBLISHER • GB)
DOI10.1111/sjpe.12200
OpenAlexW2897624955
LanguageEN
Citations received1
References cited49

This paper revisits, by means of both time series and panel data analyses, the empirical regularity popularized by Okun's (Proc Bus Econ Sect, 98‐103, 1962) seminal paper focusing on a sample of 20 advanced economies between 1978 and 2015. Not only do we provide arguably better estimates of the Okun's Law coefficient ( OLC ) (using the gap version) by employing a new filtering technique, but more importantly, we also contest the hypothesis that the OLC has been static over time. By estimating country‐specific time‐varying Okun coefficient models, we confirm that the unemployment‐output responsiveness has been changing over time. The dispersion between countries’ OLC s has been determined by some (structural) characteristics. The starting level of unemployment and the phase of the business cycle increase the estimated OLC s, while informality and certain labour and product market policies lower them. Our evidence sustains the fact that aggregate demand policies aiming at increasing output growth can equally contribute to the recovery in labour markets

Business cycle · Dispersion (optics · Econometrics · Economics · Macroeconomics · Monetary policy · Okun's law · Output gap · Sample (material · Unemployment · Unemployment rate · Economic Theory and Policy · Fiscal Policy and Economic Growth · Unemployment and Economic Growth

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