We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Exploring Okun's law asymmetry: An endogenous threshold logistic smooth transition regression approach*.
- Authors
Christopoulos, Dimitris; McAdam, Peter; Tzavalis, Elias
- Abstract
Using a novel methodology, we offer new evidence that a threshold relationship exists for Okun's law (the well‐known output–unemployment co‐movement). We use a logistic smooth transition regression (LSTR) model where threshold endogeneity is addressed using copula transformations of the threshold variable. We also suggest a test of the linearity hypothesis against the LSTR model. In line with Okun's insight (and that of the subsequent literature) that the trade‐off can be affected by different margins, we consider several potential threshold variables. We find mainly a combination of structural and policy‐related variables accounts for changes in the Okun's law trade‐off for the United States in recent decades. This conclusion is bolstered by combing these threshold candidates into a single factor. Accordingly, we find that the unemployment gap is increasingly associated with a smaller output gap. Notably, while the Great Recession accelerated that rise, the bulk of the change occurred beforehand.
- Subjects
UNITED States; GREAT Recession, 2008-2013; AMERICAN law
- Publication
Oxford Bulletin of Economics & Statistics, 2023, Vol 85, Issue 1, p123
- ISSN
0305-9049
- Publication type
Article
- DOI
10.1111/obes.12515