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Asymmetry in Okun's law

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  • Paramsothy Silvapulle
  • Imad Moosa
  • Mervyn Silvapulle

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.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 37 (2004)
Issue (Month): 2 (May)
Pages: 353-374

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Handle: RePEc:cje:issued:v:37:y:2004:i:2:p:353-374

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Cited by:
  1. Mattoscio Nicola & Bucciarelli Edgardo & Odoardi Iacopo & Persico Tony Ernesto, 2012. "AN EXAMINATION OF OKUN'(tm)S LAW: EVIDENCE FROM EUROPEAN TARGET COUNTRIES," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 237-243, December.
  2. Giovanni BUSETTA & Dario CORSO, 2008. "La legge di Okun: asimmetrie e differenziali territoriali in Italia," Working Papers 320, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  3. Ismihan, Mustafa, 2010. "A New Framework for Output-Unemployment Relationship: Okun’s Law Revisited," MPRA Paper 28135, University Library of Munich, Germany.
  4. Gunnar Bårdsen, Stan Hurn, Zoë McHugh, 2010. "Asymmetric unemployment rate dynamics in Australia," Working Paper Series 10810, Department of Economics, Norwegian University of Science and Technology.
  5. Javier J. Pérez & Jesús Rodríguez López & Teresa Leal, 2002. "Pautas cíclicas de la economía andaluza en el período 1984-2001: un análisis comparado," Economic Working Papers at Centro de Estudios Andaluces E2002/18, Centro de Estudios Andaluces.
  6. Javier J. Pérez & Jesús Rodríguez López & Carlos Usabiaga, 2002. "Análisis Dinámico de la Relación entre Ciclo Económico y Ciclo del Desempleo en Andalucía en Comparación con el Resto de España," Economic Working Papers at Centro de Estudios Andaluces E2002/07, Centro de Estudios Andaluces.
  7. João Sousa Andrade, 2009. "The PIGS, does the Group Exist? An empirical macroeconomic analysis based on the Okun Law," GEMF Working Papers 2009-11, GEMF - Faculdade de Economia, Universidade de Coimbra.
  8. Holmes, Mark J. & Silverstone, Brian, 2006. "Okun's law, asymmetries and jobless recoveries in the United States: A Markov-switching approach," Economics Letters, Elsevier, vol. 92(2), pages 293-299, August.
  9. Hoover, Gary A. & Giedeman, Daniel C. & Dibooglu, Sel, 2009. "Income inequality and the business cycle: A threshold cointegration approach," Economic Systems, Elsevier, vol. 33(3), pages 278-292, September.
  10. PERUGINI, Cristiano, 2009. "Employment Intensity Of Growth In Italy. A Note Using Regional Data," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 9(1).
  11. João Sousa Andrade, 2007. "Uma Aplicação da Lei de Okun em Portugal," GEMF Working Papers 2007-04, GEMF - Faculdade de Economia, Universidade de Coimbra.

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