An analysis of the Okun’s law for the Spanish provinces

Celia Melguizo Cháfer ()
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Celia Melguizo Cháfer: Department of Econometrics. University of Barcelona

No 201501, AQR Working Papers from University of Barcelona, Regional Quantitative Analysis Group

Abstract: The inverse relationship between unemployment and Gross Domestic Product (GDP) growth, commonly known as Okun’s law, has been traditionally analysed in the economic literature. Its application for Spain has been carried out at the national level or for the autonomous communities but it has not been analysed for provinces, the territorial level closer to local labour markets. This study analyses this relationship during the period spanning from 1985 to 2011. After testing the time series properties of provincial GDP and unemployment, we specify statiic and dynamic versions of the Okun’s law using VAR and PVAR techniques. Both static and dynamic analyses lead us to determine that provinces show large differences in their unemployment sensitivity to GDP shocks. In particular, provinces where economic activity is concentrated and Southern provinces are those suffering from higher cyclical variations in unemployment rates.

Keywords: Unemployment; Output fluctuations; Spanish provinces JEL classification: C32; C33; J23; R11 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2015-01, Revised 2015-01
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Persistent link: https://EconPapers.repec.org/RePEc:aqr:wpaper:201501

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