Okun in the Euro: New Evidence from Structural Okun Law’s Estimates for the Euro Area, 1979-2019

By Nauro F. Campos, Corrado Macchiarelli, Fotios Mitropoulos

August 9, 2024

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Format: Chicago

Nauro F. Campos, Corrado Macchiarelli, and Fotios Mitropoulos. Okun in the Euro: New Evidence from Structural Okun Law’s Estimates for the Euro Area, 1979-2019, (USA: International Monetary Fund, 2024) accessed November 12, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper provides new estimates of Okun’s unemployment-output relationship in euro area countries between 1979 and 2019. We find our structural estimates are stable but substantially lower than the reduced-form estimates that tend to characterise the literature and that the responsiveness of output to unemployment is driven by idiosyncratic factors in both euro core and periphery countries. The results are robust to conditioning on wage bargaining institutional set-ups and, yet, in the euro periphery, we find product market regulation as playing a major role in explaining the significance of Okun’s law estimates across countries.

Subject: Employment protection, Gender, Labor, Labor markets, Unemployment, Unemployment rate, Women

Keywords: Economic growth, Employment protection, Global, Impulse responses of unemployment, Labor markets, Okun law, Okun’s Law, Okun's unemployment-output relationship, Panel VAR, SP VAR, Unemployment, Unemployment rate, Unemployment to output growth, Women

Publication Details

Pages:

43
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2024/172
Stock No:

WPIEA2024172
ISBN:

9798400285714
ISSN:

1018-5941

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