Augmented okun's law within the emu: working-time or employment adjustment? a structural equation model

Hélène Syed Zwick () and S. Ali Shah Syed ()
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Hélène Syed Zwick: University of Lille1, LEM (CNRS-UMR 9221), France & Confrontations Europe, bd Saint Germain, Paris
S. Ali Shah Syed: School of Business, American University in Cairo

Economics Bulletin, 2016, vol. 36, issue 1, 440-448

Abstract: This paper examines the output-unemployment-working-time nexus within the European Monetary Union (EMU) with a dedicated focus on the impact of the Great Recession (2007-2013). Using recursive structural equation model (R-SEM) for the first time on this topic, we estimate an augmented Okun's law equation that includes the number of worked hours. The results confirm the existence of a significant and negative relation between output and unemployment and reveal a significant and positive relation between output gap and working-time. Three groups of countries according to the type of labour market response to an output variation have been identified. A first group characterized by a unilateral unemployment response, a second group characterized by a working-time response and a third group characterized by a complementary effect of both unemployment and working-time adjustment towards an output variation.

Keywords: Okun's law; European Monetary Union; Structural Equation Model; Great Recession; working-time (search for similar items in EconPapers)
JEL-codes: E1 J6 (search for similar items in EconPapers)
Date: 2016-03-17
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Citations: View citations in EconPapers (2)

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