Exploring Okun's law asymmetry: An endogenous threshold LSTR approach

Arbeitspapier

Using a novel methodology, we offer new evidence that a threshold relationship exists for Okun's law. We use a logistic smoothed transition regression (LSTR) model where possible threshold endogeneity is addressed based on copula theory. We also suggest a new test of the linearity hypothesis against the LSTR model. A combination of structural and policy-related variables accounts for changes (rises) in the Okun's parameter in the US in recent decades. Accordingly, the unemployment gap is increasingly associated with a smaller output gap. Whilst the Great Recession accelerated that rise, the bulk of the change occurred beforehand.

Object Details

• ISBN: 978-92-899-3976-8
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 2345

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Truncated and Censored Models; Switching Regression Models; Threshold Regression Models ; Specific Distributions; Specific Statistics ; Macroeconomics: Production ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
• Subject: unemployment ; output ; asymmetries ; logistic transition ; endogeneity ; copula ; Monte Carlo ; test for linearity

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Christopoulos, Dimitris ; McAdam, Peter ; Tzavalis, Elias
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2019

Further information

• DOI: doi:10.2866/120359
• Handle: http://hdl.handle.net/10419/228223
• Last update: 10.03.2025, 11:42 AM CET