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Okun's Law, Asymmetries and Jobless Recoveries in the United States: A Markov-Switching Approach

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Abstract

This paper offers a new perspective on Markov regime-switching approaches to asymmetries in Okun’s law by modeling the existing approaches as special cases. Prevailing models assume either asymmetry between unemployment and output across regimes or asymmetry within a single regime. Our specification combines both approaches. Our empirical results give an insight into the apparent ‘jobless recovery’ experiences that began in the United States in 1991 and 2001.

Suggested Citation

  • Mark J. Holmes & Brian Silverstone, 2005. "Okun's Law, Asymmetries and Jobless Recoveries in the United States: A Markov-Switching Approach," Working Papers in Economics 05/06, University of Waikato.
  • Handle: RePEc:wai:econwp:05/06
    Note: Now published: 'Economics Letters' 92(2) August 2006, pp.293-99.
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    References listed on IDEAS

    as
    1. Moosa, Imad A., 1997. "A Cross-Country Comparison of Okun's Coefficient," Journal of Comparative Economics, Elsevier, vol. 24(3), pages 335-356, June.
    2. Brian Silverstone & Richard Harris, 2001. "Testing for asymmetry in Okun's law: A cross-country comparison," Economics Bulletin, AccessEcon, vol. 5(2), pages 1-13.
    3. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-384, March.
    4. Kathryn Koenders & Richard Rogerson, 2005. "Organizational dynamics over the business cycle: a view on jobless recoveries," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 555-580.
    5. Paramsothy Silvapulle & Imad Moosa & Mervyn Silvapulle, 2004. "Asymmetry in Okun's law," Canadian Journal of Economics, Canadian Economics Association, vol. 37(2), pages 353-374, May.
    6. Jesus Crespo Cuaresma, 2003. "Okun's Law Revisited," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(4), pages 439-451, September.
    7. Daniel Aaronson & Ellen R. Rissman & Daniel G. Sullivan, 2004. "Assessing the jobless recovery," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q II, pages 2-21.
    Full references (including those not matched with items on IDEAS)

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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. Afşin Şahin & Aysit Tansel & M. Hakan Berument, 2015. "Output–Employment Relationship Across Sectors: A Long- Versus Short-Run Perspective," Bulletin of Economic Research, Wiley Blackwell, vol. 67(3), pages 265-288, July.
    3. Durech, Richard & Minea, Alexandru & Mustea, Lavinia & Slusna, Lubica, 2014. "Regional evidence on Okun's Law in Czech Republic and Slovakia," Economic Modelling, Elsevier, vol. 42(C), pages 57-65.
    4. Roger, Perman & Jean-Philippe, Boussemart & Walter, Briec & Christophe, Tavéra, 2013. "How do technical change and technological distance influence the size of the Okun’s Law coefficient?," SIRE Discussion Papers 2013-60, Scottish Institute for Research in Economics (SIRE).
    5. Turan, Güngör, 2015. "Türkiye'de Büyüme ve İşsizlik
      [Growth and Unemployment in Turkey]
      ," MPRA Paper 77773, University Library of Munich, Germany.
    6. Rui M. Pereira, 2013. "Okun's Law across the Business Cycle and during the Great Recession: A Markov Switching Analysis," Working Papers 139, Department of Economics, College of William and Mary.
    7. Rui Pereira, 2014. "Okun’s law, asymmetries and regional spillovers: evidence from Virginia metropolitan statistical areas and the District of Columbia," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 52(2), pages 583-595, March.
    8. Zanin, Luca, 2014. "On Okun’s law in OECD countries: An analysis by age cohorts," Economics Letters, Elsevier, vol. 125(2), pages 243-248.
    9. Antal, Miklós, 2014. "Green goals and full employment: Are they compatible?," Ecological Economics, Elsevier, vol. 107(C), pages 276-286.
    10. Phiri, Andrew, 2014. "Re-evaluating Okun's law in South Africa: A nonlinear co-integration approach," MPRA Paper 57398, University Library of Munich, Germany.
    11. Hutengs, Oliver & Stadtmann, Georg, 2012. "Age effects in the Okun's law within the Eurozone," Discussion Papers 322, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
    12. Ali, Amjad & Ur Rehman, Hafeez, 2015. "Macroeconomic Instability and Its Impact on Gross Domestic Product: An Empirical Analysis of Pakistan," MPRA Paper 71037, University Library of Munich, Germany.
    13. Giorgio Canarella & Stephen M. Miller, 2017. "Did Okun’s law die after the Great Recession?," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 52(4), pages 216-226, October.
    14. Jochen Hartwig, 2014. "Testing Okun's Law with Swiss Industry Data," KOF Working papers 14-357, KOF Swiss Economic Institute, ETH Zurich.
    15. Juan Urquiza, 2011. "Income Asymmetries and the Permanent Income Hypothesis," Documentos de Trabajo 409, Instituto de Economia. Pontificia Universidad Católica de Chile..
    16. Huang, Ho-Chuan (River) & Lin, Shu-Chin, 2008. "Smooth-time-varying Okun's coefficients," Economic Modelling, Elsevier, vol. 25(2), pages 363-375, March.
    17. Engemann, Kristie M. & Owyang, Michael T., 2010. "Whatever Happened To The Business Cycle? A Bayesian Analysis Of Jobless Recoveries," Macroeconomic Dynamics, Cambridge University Press, vol. 14(05), pages 709-726, November.
    18. Klinger, Sabine & Weber, Enzo, 2014. "On GDP-employment decoupling in Germany," IAB Discussion Paper 201421, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    19. Oliver Hutengs & Georg Stadtmann, 2012. "Age Effects in the Okun's Law within the Eurozone," Discussion Papers of DIW Berlin 1243, DIW Berlin, German Institute for Economic Research.
    20. Valadkhani, Abbas & Smyth, Russell, 2015. "Switching and asymmetric behaviour of the Okun coefficient in the US: Evidence for the 1948–2015 period," Economic Modelling, Elsevier, vol. 50(C), pages 281-290.
    21. Jorge Belaire-Franch & Amado Peiró, 2015. "Asymmetry in the relationship between unemployment and the business cycle," Empirical Economics, Springer, vol. 48(2), pages 683-697, March.
    22. Stefan Marth, 2015. "How strong is the correlation between unemployment and growth really? The persistence of Okun's Law and how to weaken it," WWWforEurope Policy Paper series 23, WWWforEurope.
    23. Klinger, Sabine & Weber, Enzo, 2015. "GDP-Employment Decoupling and the Productivity Puzzle in Germany," University of Regensburg Working Papers in Business, Economics and Management Information Systems 485, University of Regensburg, Department of Economics.
    24. M. Yazgan & Hakan Yilmazkuday, 2009. "Okun’s convergence within the US," Letters in Spatial and Resource Sciences, Springer, vol. 2(2), pages 109-122, October.
    25. repec:eee:ecmode:v:69:y:2018:i:c:p:291-300 is not listed on IDEAS

    More about this item

    Keywords

    Okun’s law; Markov-switching; asymmetry; jobless recoveries; United States;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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