Andrea Čížků
Economic Growth, Business Cycles and Okun’s Law: Unobserved Components Approach
Číslo: 1/2020
Periodikum: Statistika
Klíčová slova: Unobserved components, Clark’s bivariate model, Okun’s law, Kalman flter, HP flter
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Anotace:
Clark’s (1989) bivariate unobserved components model is applied in order to estimate and analyse the trend
and cycle of GDP and the unemployment rate as well as to quantify and discuss the relationship known
as Okun’s law. Empirical analysis is performed for 28 European countries for a time period including the current
economic crisis – the end period is 2018 Q4 for all economies and the beginning period ranges from 1983 Q1
to 2000 Q1 according to data availability. Important results indicate that in virtually all European countries:
(1) the growth of the trend component of GDP decreased systematically afer the crisis; (2) the output gap
improved in the last fve years – this fnding proved to be quite robust as it was also confrmed by HodrickPrescott estimates of the output gap for diferent smoothing parameter values; (3) the trend component
of the unemployment rate turned out to be constant over time, indicating that possible hysteresis efects have
not played an important role in European labour markets; (4) the output gap and cyclical unemployment rate
are highly negatively correlated, confrming the strength and validity of Okun’s law across European countries.
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and cycle of GDP and the unemployment rate as well as to quantify and discuss the relationship known
as Okun’s law. Empirical analysis is performed for 28 European countries for a time period including the current
economic crisis – the end period is 2018 Q4 for all economies and the beginning period ranges from 1983 Q1
to 2000 Q1 according to data availability. Important results indicate that in virtually all European countries:
(1) the growth of the trend component of GDP decreased systematically afer the crisis; (2) the output gap
improved in the last fve years – this fnding proved to be quite robust as it was also confrmed by HodrickPrescott estimates of the output gap for diferent smoothing parameter values; (3) the trend component
of the unemployment rate turned out to be constant over time, indicating that possible hysteresis efects have
not played an important role in European labour markets; (4) the output gap and cyclical unemployment rate
are highly negatively correlated, confrming the strength and validity of Okun’s law across European countries.