<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>Numerous studies have been conducted based on Okun’s Law (1962), researchers proposing various approaches, while the two most common are the difference approach, which reflects the link between the variation of unemployment rate and the output growth, and the gap approach, which shows the relationship between the deviation of the actual unemployment rate from the natural unemployment rate and the Gross Domestic Product (GDP) gap. In order to see how the relationship looks like over time and how the Okun’s coefficient varies from country to country, this study analyzes the sensitivity of unemployment at output changes while carries out a comparative analysis for Central and Eastern Europe (CEE) countries, regarding Okun's Law applicability in the post-financial crisis period, taking into consideration previous relevant researches. Therefore, the assessment is based on quarterly data, between 2010 and 2019, for unemployment and economic growth, recorded in five CEE countries, members of the Organization for Economic Co-operation and Development (OECD): Bulgaria, Czech Republic, Hungary, Poland and Romania. While the research is based both on the gap and difference method, it may lead to results sensitive to the method chosen in order to assess the unobservable variables, namely potential output and natural unemployment rate. In order to determine the structural components of the GDP and unemployment rate, it is used the Hodrick-Prescott univariate filter, applied on quarterly data. Before estimating the Okun's coefficient, the study also examines the causality relationship between unemployment and GDP using Granger causality test.</p>
</abstract>

Numerous studies have been conducted based on Okun’s Law (1962), researchers proposing various approaches, while the two most common are the difference approach, which reflects the link between the variation of unemployment rate and the output growth, and the gap approach, which shows the relationship between the deviation of the actual unemployment rate from the natural unemployment rate and the Gross Domestic Product (GDP) gap. In order to see how the relationship looks like over time and how the Okun’s coefficient varies from country to country, this study analyzes the sensitivity of unemployment at output changes while carries out a comparative analysis for Central and Eastern Europe (CEE) countries, regarding Okun's Law applicability in the post-financial crisis period, taking into consideration previous relevant researches. Therefore, the assessment is based on quarterly data, between 2010 and 2019, for unemployment and economic growth, recorded in five CEE countries, members of the Organization for Economic Co-operation and Development (OECD): Bulgaria, Czech Republic, Hungary, Poland and Romania. While the research is based both on the gap and difference method, it may lead to results sensitive to the method chosen in order to assess the unobservable variables, namely potential output and natural unemployment rate. In order to determine the structural components of the GDP and unemployment rate, it is used the Hodrick-Prescott univariate filter, applied on quarterly data. Before estimating the Okun's coefficient, the study also examines the causality relationship between unemployment and GDP using Granger causality test.

Empirical Evidences Regarding Okun's Law in the Central and Eastern Europe in the Post – Financial Crisis Period

Proceedings of the International Conference on Business Excellence

This work is licensed under the Creative Commons Attribution 4.0 International License.

Numerous studies have been conducted based on Okun’s Law (1962), researchers proposing various approaches, while the two most common are the difference...

Empirical Evidences Regarding Okun's Law in the Central and Eastern Europe in the Post – Financial Crisis Period

Published Online: Jul 03, 2024

Page range: 358 - 366

DOI: https://doi.org/10.2478/picbe-2024-0031

Keywords
Okun`s Law, Granger causality test, potential GDP, natural rate of unemployment, Hodrick-Prescott filter, output gap, structural components

© 2024 Francesca Dana Andreescu., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Empirical Evidences Regarding Okun's Law in the Central and Eastern Europe in the Post – Financial Crisis Period

Published Online: Jul 03, 2024

Page range: 358 - 366

DOI: https://doi.org/10.2478/picbe-2024-0031

KeywordsOkun`s Law, Granger causality test, potential GDP, natural rate of unemployment, Hodrick-Prescott filter, output gap, structural components

© 2024 Francesca Dana Andreescu., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Keywords
Okun`s Law, Granger causality test, potential GDP, natural rate of unemployment, Hodrick-Prescott filter, output gap, structural components