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Okun's Law, Asymmetries and Jobless Recoveries in the United States: A Markov-Switching Approach

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Abstract

This paper offers a new perspective on Markov regime-switching approaches to asymmetries in Okun’s law by modeling the existing approaches as special cases. Prevailing models assume either asymmetry between unemployment and output across regimes or asymmetry within a single regime. Our specification combines both approaches. Our empirical results give an insight into the apparent ‘jobless recovery’ experiences that began in the United States in 1991 and 2001.

Suggested Citation

  • Mark J. Holmes & Brian Silverstone, 2005. "Okun's Law, Asymmetries and Jobless Recoveries in the United States: A Markov-Switching Approach," Working Papers in Economics 05/06, University of Waikato.
    • Handle: RePEc:wai:econwp:05/06
    Note: Now published: 'Economics Letters' 92(2) August 2006, pp.293-99.
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    as
    1. Moosa, Imad A., 1997. "A Cross-Country Comparison of Okun's Coefficient," Journal of Comparative Economics, Elsevier, vol. 24(3), pages 335-356, June.
    2. Brian Silverstone & Richard Harris, 2001. "Testing for asymmetry in Okun's law: A cross-country comparison," Economics Bulletin, AccessEcon, vol. 5(2), pages 1-13.
    3. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-384, March.
    4. Kathryn Koenders & Richard Rogerson, 2005. "Organizational dynamics over the business cycle: a view on jobless recoveries," Review, Federal Reserve Bank of St. Louis, vol. 87(Jul), pages 555-580.
    5. Paramsothy Silvapulle & Imad Moosa & Mervyn Silvapulle, 2004. "Asymmetry in Okun's law," Canadian Journal of Economics, Canadian Economics Association, vol. 37(2), pages 353-374, May.
    6. Jesús Crespo Cuaresma, 2003. "Okun's Law Revisited," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(4), pages 439-451, September.
    7. Daniel Aaronson & Ellen R. Rissman & Daniel G. Sullivan, 2004. "Assessing the jobless recovery," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 28(Q II), pages 2-21.
    8. Paramsothy Silvapulle & Imad A. Moosa & Mervyn J. Silvapulle, 2004. "Asymmetry in Okun's law," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 37(2), pages 353-374, May.
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    More about this item

    Keywords

    Okun’s law; Markov-switching; asymmetry; jobless recoveries; United States;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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