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Output and unemployment dynamics in the United States: 1950–1985
Author(s) -
Evans George W.
Publication year - 1989
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.3950040302
Subject(s) - bivariate analysis , unemployment , business cycle , econometrics , okun's law , economics , unemployment rate , benchmark (surveying) , natural rate of unemployment , persistence (discontinuity) , measure (data warehouse) , dynamics (music) , mathematics , statistics , macroeconomics , computer science , physics , geotechnical engineering , geodesy , database , acoustics , engineering , geography
For US data over 1950–1985 the stochastic components of GNP growth and the unemployment rate appear to be stationary, and there is substantial feedback between these variables. The unconditional mean rate of unemployment in a joint model thus provides a natural benchmark in discussions of the ‘business cycle’. A bivariate VAR model is used to describe output–unemployment dynamics, to estimate the degree of persistence of output innovations, and to decompose output into trend and cycle. The bivariate results are interpreted using a restricted VAR and it is shown that a closely related cyclical measure can be obtained directly from the Okun's Law equation.