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Asymmetry in Okun's law

Paramsothy Silvapulle, Imad Moosa and Mervyn Silvapulle
Authors registered in the RePEc Author Service: Param Silvapulle ()

Canadian Journal of Economics, 2004, vol. 37, issue 2, 353-374

Abstract: In this paper we support the proposition that the output-unemployment relationship as represented by Okun's law is asymmetric. Okun's coefficients are defined based on a dynamic model that allows for asymmetry in the relationship between cyclical output and unemployment. Using data from the United States for the post-war period, our results show that the short-run effects of positive cyclical output on cyclical unemployment are quantitatively different from those of negative ones, and the data are consistent with the proposition that cyclical unemployment is more sensitive to negative than to positive cyclical output. Several theoretical explanations of asymmetry rationalize the findings.

JEL-codes: C13 C22 E32 (search for similar items in EconPapers)
Date: 2004
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Handle: RePEc:cje:issued:v:37:y:2004:i:2:p:353-374