Articlegreen2004

Asymmetry in Okun's law

Param Silvapulle · Imad A. Moosa · Mervyn Joseph Silvapulle

180 citations0/0 files storedCanadian Journal of Economics/Revue canadienne d économique

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Unemployment and Economic Growth Monetary Policy and Economic Impact Labor market dynamics and wage inequality

Abstract

Abstract. In this paper we support the proposition that the output‐unemployment relationship as represented by Okun's law is asymmetric. Okun's coefficients are defined based on a dynamic model that allows for asymmetry in the relationship between cyclical output and unemployment. Using data from the United States for the post‐war period, our results show that the short‐run effects of positive cyclical output on cyclical unemployment are quantitatively different from those of negative ones, and the data are consistent with the proposition that cyclical unemployment is more sensitive to negative than to positive cyclical output. Several theoretical explanations of asymmetry rationalize the findings. JEL Classification: C13, C22, E32

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References

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Cited by

2013Why did unemployment respond so differently to the global financial crisis across countries? Insights from Okun’s Law 2006Okun's law, asymmetries and jobless recoveries in the United States: A Markov-switching approach 2014Do forecasters believe in Okun’s Law? An assessment of unemployment and output forecasts 2012Do professional forecasters apply the Phillips curve and Okun's law? Evidence from six Asian-Pacific countries

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