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Does output predict unemployment? A look at Okun's law in Greece
Author(s) -
KARFAKIS Costas,
KATRAKILIDIS Constantinos,
TSANANA Eftychia
Publication year - 2014
Publication title -
international labour review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.433
H-Index - 46
eISSN - 1564-913X
pISSN - 0020-7780
DOI - 10.1111/j.1564-913x.2014.00018.x
Subject(s) - unemployment , okun's law , economics , granger causality , causality (physics) , full employment , misery index , real gross domestic product , unemployment rate , econometrics , macroeconomics , labour economics , physics , quantum mechanics
Using a dynamic specification of Okun's law, the authors examine the relationship between unemployment and output in Greece over the period 2000–12. While Granger causality tests indicate that real output is important to understanding future movements in unemployment, Okun's ratio is found to be 3:1, implying that a 1 per cent increase in unemployment was associated with a 3 per cent decrease in real output during the 13‐year period under study. Also, asymmetric analysis shows that the response of unemployment to real output is stronger during contractions of real economic activity than in expansionary periods.