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Regional growth and unemployment in the medium run: asymmetric cointegrated Okun’s Law for UK regions

Author

Listed:
  • Silvia Palombi

    (University of Strathclyde)

  • Roger Perman

    (University of Strathclyde)

  • Christophe Tavéra

    (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR1 - Université de Rennes 1 - UNIV-RENNES - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper tests for the presence of a long run asymmetric Okun’s Law relationship between regional output and regional unemployment rate in U.K. regions. The existence of cointegration is tested with a panel data version of the hidden cointegration technique suggested by Granger and Yoon. A novelty of the paper is to combine the method of hidden cointegration with a panel data method of removing crosssectional dependence. The long run Okun relationship for regions in the U.K. appears to confirm results found elsewhere in the literature on countries as a whole, although the coefficients tend to be smaller.

Suggested Citation

  • Silvia Palombi & Roger Perman & Christophe Tavéra, 2015. "Regional growth and unemployment in the medium run: asymmetric cointegrated Okun’s Law for UK regions," Post-Print halshs-01183238, HAL.
  • Handle: RePEc:hal:journl:halshs-01183238
    DOI: 10.1080/00036846.2015.1068922
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01183238
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    References listed on IDEAS

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    1. David E. Altig & Terry J. Fitzgerald & Peter Rupert, 1997. "Okun's law revisited: should we worry about low unemployment?," Economic Commentary, Federal Reserve Bank of Cleveland, issue May.
    2. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    3. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
    4. Bernard Fingleton, 2003. "Increasing returns: evidence from local wage rates in Great Britain," Oxford Economic Papers, Oxford University Press, vol. 55(4), pages 716-739, October.
    5. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
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    Cited by:

    1. repec:eee:joecas:v:13:y:2016:i:c:p:81-88 is not listed on IDEAS
    2. Bande, Roberto & Martín-Román, Ángel L., 2017. "Regional differences in the Okun’s Relationship: New Evidence for Spain (1980-2015)," MPRA Paper 79833, University Library of Munich, Germany.

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