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Recent trends in Okun's law : eleven countries from 1995 to 2017

Abstract : We present an update of the Okun’s coefficient using quarterly data for eleven major countries from 1995 to 2017. We find that Okun’s relationship is still valid but with significant variability across countries and not at the same level than before: one percentage point of variation in the unemployment rate tends to be associated with less variation in the growth rate than previous studies on earlier periods have pointed out. We test for a structural break in 2008 and find that Okun’s coefficient has been increased in some countries, left unchanged in some others. Taking advantage of important GDP fluctuations in recent years, we test for asymmetry over the various phases of the business cycle. Asymmetry is present in some countries and is revealing domestic differences in labour management during cyclical downturns. The paper emphasizes the need to link the unemployment-growth relationship with the reverse growth-unemployment relationship for a comprehensive view on international differences.
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Submitted on : Tuesday, February 18, 2020 - 9:26:46 AM
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Gilles Margirier. Recent trends in Okun's law : eleven countries from 1995 to 2017. 2018. ⟨halshs-02482421⟩

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