Abstract

RODRIGUEZ BENAVIDES, Domingo; MULLER DURAN, Nancy  and  PERROTINI HERNANDEZ, Ignacio. Unemployment and Output in Mexico, the United States and Canada: A Non-Linear Relationship. Anál. econ. [online]. 2022, vol.37, n.95, pp.5-25.  Epub Aug 01, 2022. ISSN 2448-6655.  https://doi.org/10.24275/uam/azc/dcsh/ae/2022v37n95/rodriguez.

The relationship between fluctuations of the unemployment rate and the growth rate of output (Okun’s Law) in Mexico, the United States (US) and Canada during the period 2006-2019 is dealt with in the present paper. We posit the hypothesis that cyclical shocks can permanently affect structural unemployment. A non-linear autorregresive distributive lag (NARDL) model is displayed to test the assumption of symmetric effects in Okun´s Law analysis. Our econometric results suggest that while in the US and Canada there is evidence of an asymmetric Okun’s Law in the short run and the long-term, respectively, for the case of Mexico no such evidence exists. These discrepancies speak to the relevance of looking at the existence of non- linear effects in Okun´s Law. The accurate identification of such effects can shed light for both labour market reforms and stabilization policy design.

Keywords : Unemployment; industrial production index; Okun´s Law; Nonlinear autoregressive distributed lag (NARDL).

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