Testing Okun’s law. Theoretical and empirical considerations using fractional integration

Gil-Alana, Luís A.; Škare, Marinko; Burić, Sanja Blažević

doi:10.1080/00036846.2019.1646407

Cited by 15 publications

(7 citation statements)

References 48 publications

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“…Since then, many studies have looked at the empirical validity of the Okun's law (e.g., Hamada & Kurosaka, 1984;Attfield & Silverstone, 1998;Christopoulos, 2004;Gabrisch & Buscher, 2006;Canarella & Miller, 2017;Neely, 2010;Moosa, 1997;Pizzo, 2020;Huang & Yeh, 2013;Ball et al, 2019). Gil-Alana et al (2020) provides a very extensive review of the literature covering the Okun's law from 1974 to 2019. In general, majority of the results obtained, which covered various sample periods and a variety of countries such as Latin America, the G7, the OECD, non-OECD, developed and developing countries, have confirmed the validity of Okun's law, with higher estimated Okun's coefficients found in countries with more rigid labour market provisions associated with the presence of stronger trade unions in such countries.…”

Section: Outputs and Unemploymentmentioning

confidence: 99%

“…Moreover, some studies highlighted the non-linear and asymmetric relationships between unemployment and output (Cuaresma, 2003;Perman et al, 2015;Silvapulle et al, 2004;Huang & Chang, 2005;Marinkov & Geldenhuys, 2007;Owyang & Vermann, 2013). Recently, Gil-Alana et al (2020) tested the validity of the Okun's law taking into consideration modern economic circumstances and new operational specifications. They used fractionally integrated methodologies to look at the issue for 24 countries.…”

Section: Outputs and Unemploymentmentioning

confidence: 99%

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Unemployment Behaviour in the Covid-19 Pandemic: Evidence From Developing Countries

Tang

Abosedra

2023

IJBS

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This paper explores the impacts of the COVID-19 pandemic, corruption and other determinants on unemployment in developing countries using panel dataset for 89 developing countries from January to December 2020. The proposed unemployment model is estimated utilising a newly formulated conceptual framework to examine whether COVID-19 pandemic, corruption, and human capital, play a moderating role on unemployment determination in our selected developing countries. The model is estimated using the dynamic panel system generalised method of moments (GMM) estimator. Apart from output, inflation and human capital, our results show that the COVID-19 pandemic and corruption are major variables in explaining the unemployment rate for our sampled countries. Furthermore, and more notably, we find evidence that the COVID-19 pandemic and corruption appear to significantly restrain and alter the role of outputs and human capital in impacting unemployment. Therefore, the detrimental effects of the COVID-19 pandemic and corruption on the economies and labour markets of countries examined should not be under-estimated. Additionally, findings show that, while policy initiatives to combat the COVID-19 pandemic are critical, strengthening anti-corruption regulations would further improve the efficiency of any attempt to reduce unemployment rates associated with the COVID-19 period.

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Section: Outputs and Unemploymentmentioning

confidence: 99%

Section: Outputs and Unemploymentmentioning

confidence: 99%

Unemployment Behaviour in the Covid-19 Pandemic: Evidence From Developing Countries

Tang

Abosedra

2023

IJBS

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“…Perman et al (2015) conducted a meta-analysis of Okun’s law using a sample of 269 estimates the Okun’s coefficients to discover the rationales for differences in the existing empirical findings. Some of the recent studies on the subject matter include Gil-Alana et al (2020), Butkus et al (2020), Widarjono (2020), Huang et al (2020) and Raifu and Aminu (2021). These recent studies and the existing ones have addressed several issues regarding the testing of Okun’s law in different countries, which border on the best ways to model the relationship between economic growth and unemployment.…”

Section: Literature Reviewmentioning

confidence: 99%

Testing Okun’s law at sectoral level: evidence from Nigeria

Raifu

2022

IJDI

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Purpose Researchers have long been interested in testing the validity of Okun’s law due to its macroeconomic policy implications. However, most of the studies have focused on testing the law using aggregate data on unemployment and output. In recent times, attention has been shifted to testing the law at the sectoral level. In light of this, the purpose of this study is to examine the response of unemployment to sectoral outputs in Nigeria using the data that covers a period from 1981-2020. Design/methodology/approach To test the validity of Okun’s law at the sectoral level, both difference and gap methods of specifying Okun’s law are used. Furthermore, the author also uses a series of estimation methods, which include ordinary least squares (OLS), dynamic OLS (DOLS), fully modified OLS (FMOLS) and canonical cointegration regression (CCR). Findings The results, based on the difference model, are mixed irrespective of estimation and data filter methods. For the gap model, Okun’s law holds for all sectors irrespective of estimation techniques (especially DOLS, FMOLS and CCR) when the Hodrick–Prescott filter method is used to filter data. However, the author discovers that the coefficients of Okun’s law vary across the sectors as the response of unemployment to services sector output is greater than the rest of the sectors. When the Hamilton filter method is used to filter data, the results appear to be mixed across the sectors. The results are almost ditto when all the sectoral variables are put in one model. Originality/value To the best of the author’s knowledge, this is the first study that investigates the validity of sectoral Okun’s law in Nigeria, the leading economy in Africa.

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“…Although the unemployment-output ratio has been extensively studied since Okun first stated his law in 1962, almost all of that research relates to developed countries (Ball, Leigh and Loungani 2017;Blanchard 1997;Gil-Alana, Skare and Buric 2020;Ismihan 2010;Kaufman 1988;Moosa 1997;Paldam 1987;Perman andTavera 2005 and2007;Schnabel 2002;Sögner and Stiassny 2002, among others), while empirical evidence remains scarce in the case of Latin American countries. What information is available (Ball et al 2019 andPizzo 2020, among others) seems to indicate that the link between the two variables is less significant in Latin America than in the developed world.…”

Section: Introductionmentioning

confidence: 99%

The correlation between unemployment and economic growth in Latin America – Okun's law estimates by country

Porras-Arena

Román

2023

International Labour Review

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The authors question the validity of Okun's law in Latin America in this paper. Based on several econometric models, they show that fluctuations in economic activity have a lesser impact on unemployment rates in Latin American countries than in other, more advanced economies. Instead of stimulus policies focused on reducing unemployment in general, these countries need targeted policies that encourage job creation in specific sectors. That being said, the unemployment—output ratio differs from one Latin American country to another. Where the ratio is weak or non‐existent, cyclical variations adversely affect the quality of employment – another aspect that must also be addressed by economic policy.

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Testing Okun’s law. Theoretical and empirical considerations using fractional integration

Cited by 15 publications

References 48 publications

Unemployment Behaviour in the Covid-19 Pandemic: Evidence From Developing Countries

Unemployment Behaviour in the Covid-19 Pandemic: Evidence From Developing Countries

Testing Okun’s law at sectoral level: evidence from Nigeria

The correlation between unemployment and economic growth in Latin America – Okun's law estimates by country

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