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Functional form in regression models of Okun's law

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  • Christian Weber
  • James West

Abstract

The Box-Cox transformation is used to determine the functional form for Okun's relationship between the output gap and the unemployment rate. Results from two different data sets strongly fail to reject his double log specification, and the MLE results are quantitatively very similar to a double log model specification.

Suggested Citation

  • Christian Weber & James West, 1996. "Functional form in regression models of Okun's law," Applied Economics Letters, Taylor & Francis Journals, vol. 3(9), pages 607-609.
    • Handle: RePEc:taf:apeclt:v:3:y:1996:i:9:p:607-609
    DOI: 10.1080/135048596356069
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    References listed on IDEAS

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    1. Prachowny, Martin F J, 1993. "Okun's Law: Theoretical Foundations and Revised Estimates," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 331-336, May.
    2. Charles Adams & David T. Coe, 1990. "A Systems Approach to Estimating the Natural Rate of Unemployment and Potential Output for the United States," IMF Staff Papers, Palgrave Macmillan, vol. 37(2), pages 232-293, June.
    3. Robert J. Gordon, 1984. "Unemployment and Potential Output in the 1980s," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 15(2), pages 537-568.
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    Cited by:

    1. Kwami Adanu, 2002. "A Cross-Province Comparison of Okun's Coefficient for Canada," Econometrics Working Papers 0204, Department of Economics, University of Victoria.
    2. Myeong Jun Kim & Stanley I. M. Ko & Sung Y. Park, 2021. "On time and frequency-varying Okun’s coefficient: a new approach based on ensemble empirical mode decomposition," Empirical Economics, Springer, vol. 61(3), pages 1151-1188, September.
    3. Shabir Mohsin Hashmi & Ali Gul Khushik & Muhammad Akram Gilal & Zhao Yongliang, 2021. "The Impact of GDP and Its Expenditure Components on Unemployment Within BRICS Countries: Evidence of Okun’s Law From Aggregate and Disaggregated Approaches," SAGE Open, , vol. 11(2), pages 21582440211, June.
    4. Andrew Phiri, 2014. "Nonlinear Co-Integration Between Unemployment and Economic Growth in South Africa," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 12(4 (Winter), pages 303-324.
    5. Phiri, Andrew, 2014. "Re-evaluating Okun's law in South Africa: A nonlinear co-integration approach," MPRA Paper 57398, University Library of Munich, Germany.
    6. Elhorst, J. Paul & Emili, Silvia, 2022. "A spatial econometric multivariate model of Okun's law," Regional Science and Urban Economics, Elsevier, vol. 93(C).

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