Okun's law, asymmetries and jobless recoveries in the United States: A Markov-switching approach

Abstract

This paper offers a new perspective on Markov regime-switching approaches to asymmetries in Okun's law by modeling the existing approaches as special cases.Prevailing models assume either asymmetry between unemployment and output across regimes or asymmetry within a single regime. Our specification combines both approaches. Our empirical results give an insight into the apparent 'jobless recovery' experiences that began in the United States in 1991 and 2001. KeywordsOkun's law Markov-switching asymmetry jobless recoveries JEL Classification C22; E32 AcknowledgementsWe are grateful for helpful comments from an anonymous referee and participants at the 2005

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