View in EDS

Are there more than three regimes in the output-unemployment relationship? A panel quantile regression estimates of Okun's gap model in EU countries.

Saved in:
Bibliographic Details
Title: Are there more than three regimes in the output-unemployment relationship? A panel quantile regression estimates of Okun's gap model in EU countries.
Authors: Butkus, Mindaugas, Dargenyte-Kacileviciene, Laura, Matuzeviciute, Kristina, Rupliene, Dovile, Seputiene, Janina
Source: Eastern Journal of European Studies; Jun2024, Vol. 15 Issue 1, p201-218, 18p
Subject Terms: QUANTILE regression, UNEMPLOYMENT statistics, FISCAL policy, REGRESSION analysis, UNEMPLOYMENT
Abstract: Until recently, the output-unemployment relationship (Okun's coefficient) was believed to follow two regimes, implying a uniform effect of expansionary fiscal policy on unemployment during economic booms and declines. However, research by Oh (2018) and Donayre (2022) introduced a three-regime approach, suggesting this relationship varies over different economic phases. Building on this, we propose a multinomial Okun's coefficient model using a gap model and quantile regression to estimate the coefficient at various unemployment levels. Our findings reveal that Okun's coefficient is significantly higher during severe recessions and lower at the onset of economic decline compared to the two-regime model. This indicates that the effectiveness of expansionary fiscal policy in reducing unemployment is limited when implemented at the start of a recession and is more effective during severe recessions, suggesting a need to re-evaluate the timing of such policies. [ABSTRACT FROM AUTHOR]
Copyright of Eastern Journal of European Studies is the property of Centre for European Studies and its content may not be copied or emailed to multiple sites without the copyright holder's express written permission. Additionally, content may not be used with any artificial intelligence tools or machine learning technologies. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)
Database: Complementary Index
Description
Abstract:Until recently, the output-unemployment relationship (Okun's coefficient) was believed to follow two regimes, implying a uniform effect of expansionary fiscal policy on unemployment during economic booms and declines. However, research by Oh (2018) and Donayre (2022) introduced a three-regime approach, suggesting this relationship varies over different economic phases. Building on this, we propose a multinomial Okun's coefficient model using a gap model and quantile regression to estimate the coefficient at various unemployment levels. Our findings reveal that Okun's coefficient is significantly higher during severe recessions and lower at the onset of economic decline compared to the two-regime model. This indicates that the effectiveness of expansionary fiscal policy in reducing unemployment is limited when implemented at the start of a recession and is more effective during severe recessions, suggesting a need to re-evaluate the timing of such policies. [ABSTRACT FROM AUTHOR]
ISSN:2068651X
DOI:10.47743/ejes-2024-0109