Alternative Methods of Estimating the Okun Coefficient. Applications for Romania

by Caraiani, Petre
Published in Romanian Journal of Economic Forecasting,
volume 7 issue 4, 2006.

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The purpose of this study is to estimate the Okun coefficient for Romania for the 1991-2004 period. In order to derive it, I use a few alternative methods. As a dependent variable I use the gap of the unemployment rate while the independent variable is the gap of the production, where the aggregate production is approximated by the industrial production. I estimate the relationship through an ARDL model and through a bivariate structural VAR. The results indicate an Okun coefficient of about -0.17 which suggests some rigidity of the labor market.

Keywords: Business Cycles, Unemployment, Okun's Law
JEL Classification: E23, E24, E32