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Regional growth and unemployment: the validity of Okun's law for the Finnish regions

Aki Kangasharju (), Christophe Tavera () and Peter Nijkamp

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Abstract: This paper offers a concise critical overview of Okun's Law, with particular attention for its relevance in open economic systems of regions. Based on an extensive set of economic data for Finnish regions, the existence of cointegration is tested using alternative statistical methods, viz. the residual-based test and the conditional error correction model. A novelty of the paper is to combine a method of hidden cointegrations with a method of removing cross-sectional dependence. After correcting for hidden cointegrations and cross-sectional dependence, both statistical methods used yield almost similar results and confirm the presence of cointegration for the relevant data on Finnish regions. The long-run Okun relationship for regions in Finland appears to confirm results found elsewhere in the literature on countries as a whole, although the coefficients tend to be smaller.

Keywords: Okun's Law; (hidden) cointegration; asymmetry; residual-based test; conditional error correction model; regional growth (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (10)

Published in Spatial Economic Analysis, 2012, 7 (3), pp.381-395. ⟨10.1080/17421772.2012.694141⟩

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Journal Article: Regional Growth and Unemployment: The Validity of Okun's Law for the Finnish Regions (2012) Downloads
Working Paper: Regional growth and unemployment. The validity of Okun's law for the Finnish regions (2011) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00724237

DOI: 10.1080/17421772.2012.694141

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