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Examining the Stability of Okun’s Coefficient

Nektarios Michail

No 2015-2, Working Papers from Central Bank of Cyprus

Abstract: The stability of Okun’s coefficient in the US from 1949 to 2015 is examined using a GARCH model in order to capture the volatility in the series. Once the volatility is taken into account, rolling estimations suggest that the coefficient for the unemployment rate is very stable across time, irrespective of the specification (gap or growth model) or the length of the window. In addition, the results suggest that short-term shocks were more important to output fluctuations during the 1970s stagflation period while long-term shocks were significant only when data from the recent global financial crisis were incorporated.

Keywords: unemployment; GARCH; volatility; rolling window; Okun’s law (search for similar items in EconPapers)
JEL-codes: C32 E23 E24 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2015-12
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Journal Article: EXAMINING THE STABILITY OF OKUN'S COEFFICIENT (2019) Downloads
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