Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/228223
Authors: 
Christopoulos, Dimitris
McAdam, Peter
Tzavalis, Elias
Year of Publication: 
2019
Series/Report no.: 
ECB Working Paper No. 2345
Abstract: 
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.
Subjects: 
unemployment
output
asymmetries
logistic transition
endogeneity
copula
Monte Carlo
test for linearity
JEL: 
C24
C46
E23
E24
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-3976-8
Document Type: 
Working Paper

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