An empirical analysis of Okun’s laws in ASEAN using time-varying parameter model

Jun Kim, Jong Cheol Yoon and Sang Young Jei

Physica A: Statistical Mechanics and its Applications, 2020, vol. 540, issue C

Abstract: This study revisits Okun’s law for the ASEAN-6. We apply a time-varying parameter model to simultaneously consider nonlinearity and asymmetric characteristics of Okun’s law. The result shows that Okun’s law does not hold in other countries except Thailand, Philippines, and Malaysia. That is because FDI plays an important role in economic growth, and the shortage of skilled workers and the surplus of unskilled workers coexist. On the other hand, Okun’s law is statistically valid for Thailand, Malaysia, and the Philippines. These countries have a low unemployment rate because of the characteristics of labor market. In addition, the detrend GDP shows a similar pattern to the time-varying coefficient. This indicates that the negative relationship between the unemployment rate and the output strengthens in the recession period because the economic growth in ASEAN-6 countries highly depends on foreign investment.

Keywords: Okun’s law; Emerging countries; Association of South-East Asian Nations (ASEAN); A time-varying coefficient model (search for similar items in EconPapers)
JEL-codes: C22 J64 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:540:y:2020:i:c:s0378437119317339

DOI: 10.1016/j.physa.2019.123068

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