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Time series analysis of GDP, employment, and compensation in Canada controlling for nonlinear dynamics

Author

Listed:
  • Adian McFarlane

    (School of Management, Economics, and Mathematics, King`s University College at Western University)

  • Anupam Das

    (Department of Economics, Justice, and Policy Studies, Mount Royal University)

Abstract

This paper examines the relations between real GDP, real labour compensation per hour, and market hours worked in Canada over the period 1981Q1 to 2017Q4. We employ causality testing using the vector autoregression lag augmented approach based on possibly integrated or cointegrated processes. This approach avoids the pre-test bias associated with most other causality testing approaches. In addition, we control for the asymmetric impact of real GDP growth on the evolution of these variables. The first finding is that of unidirectional causality from hours worked to real GDP and bidirectional causality between real compensation per hour and market hours worked. Second, we find that the variables have a unique long-run cointegrating relationship. Third, controlling for the non-linear dynamics is important in analysing the causal relations among these variables.

Suggested Citation

  • Adian McFarlane & Anupam Das, 2019. "Time series analysis of GDP, employment, and compensation in Canada controlling for nonlinear dynamics," Economics Bulletin, AccessEcon, vol. 39(1), pages 662-675.
    • Handle: RePEc:ebl:ecbull:eb-18-00471
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    File URL: http://www.accessecon.com/Pubs/EB/2019/Volume39/EB-19-V39-I1-P67.pdf
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    References listed on IDEAS

    as
    1. Ian Dew-Becker & Robert J. Gordon, 2005. "Where Did Productivity Growth Go? Inflation Dynamics and the Distribution of Income," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 36(2), pages 67-150.
    2. Afşin Şahin & Aysit Tansel & M. Hakan Berument, 2014. "Output--employment relationship across employment status: evidence from Turkey," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 7(1), pages 99-121, March.
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    Cited by:

    1. Das, Anupam & McFarlane, Adian, 2019. "Non-linear dynamics of electric power losses, electricity consumption, and GDP in Jamaica," Energy Economics, Elsevier, vol. 84(C).
    2. Das, Anupam & Brown, Leanora & Mcfarlane, Adian, 2023. "Economic Misery and Remittances in Jamaica," Journal of Economic Development, The Economic Research Institute, Chung-Ang University, vol. 48(2), pages 33-52, June.

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    More about this item

    Keywords

    Hours worked; compensation; nonlinear dynamics; GDP; Canada;
    All these keywords.

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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