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Do Structural Breaks exist in Okun’s Law? Evidence from the Lost Decade in Japan

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  • Iiboshi, Hirokuni
  • Wakita, Shigeru

Abstract

This paper presents an analysis as to whether or not there has been a structural break of Okun’s Law, and if so, how many, when and what kind of break, using Bayesian methods via MCMC (Markov Chain Monte Carlo) simulation for the Japanese data from 1961Q1 to 2001Q1. In addition, it identifies structural breaks both in trends (normal level) and cyclical components (normal level), which are ecomposed from output and unemployment rate by new proposed methods as well as widespread methods: H-P filter and Band Pass filter, in contrast to the previous studies of several countries.

Suggested Citation

  • Iiboshi, Hirokuni & Wakita, Shigeru, 2004. "Do Structural Breaks exist in Okun’s Law? Evidence from the Lost Decade in Japan," MPRA Paper 87392, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:87392
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    References listed on IDEAS

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    Cited by:

    1. Shigeru Wakita, 2006. "The Lost Decade in the Japanese Labor Market : Labor's share and Okun's Law," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 2(1), pages 77-96, January.

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    More about this item

    Keywords

    Structural Change Test with Unknown Timing; MCMC; Kalman Filter; Hodrick-Prescott Filter; Band Pass Filter; Bayesian inference;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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