Okun’S Law In Malaysia: An Autoregressive Distributed Lag (Ardl) Approach With Hodrick-Prescott (Hp) Filter
Okun’s Law has present in most of the European countries. It explained the negative relationship between output growth and unemployment rate. It has been a norm for the existence of the negative relationship between output growth and unemployment. The impact of high unemployment rate is direct, right after the recession or the decrease of output growth. It is therefore important to discover the effect of the relationship because from there, we will be able to effectively determine the suitable policy. This paper tends to examine the existence of Okun’s relationship in terms of Malaysia context using a rather new econometric approach. The relationship is measured by applying the first difference and gap model with Hodrick-Prescott filter (HP filter), furthered with Autogressive Distributed Lag (ARDL) to determine the co-integration between the variables and their causality. The main reason of applying ARDL is because of the small sample of data and it’s applicability on the order of integration, which is regardless even if the regressors are stationary. Additional to that, the method enables us to find the relationship between unemployment and output without determining the natural rate of output nor natural rate of unemployment
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Stacey L. Schreft & Aarti Singh, 2003. "A closer look at jobless recoveries," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 45-73.
- M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
- Prachowny, Martin F J, 1993. "Okun's Law: Theoretical Foundations and Revised Estimates," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 331-36, May.
- Weber, Christian E, 1995. "Cyclical Output, Cyclical Unemployment, and Okun's Coefficient: A New Approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(4), pages 433-45, Oct.-Dec..
- Edward S. Knotek & II, 2007. "How useful is Okun's law?," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 73-103.
- Vougas, Dimitrios V., 2003. "Unemployment in Greece," Journal of Policy Modeling, Elsevier, vol. 25(2), pages 107-112, February.
When requesting a correction, please mention this item's handle: RePEc:grg:01biss:v:2:y:2011:i:1:p:95-103. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (editor)The email address of this maintainer does not seem to be valid anymore. Please ask editor to update the entry or send us the correct address
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.