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Dynamic analysis of the relation between economic cycle and unemployment cycle: a regional application

Author(s): Javier J. Pérez | Jesús Rodríguez | Carlos Usabiaga

Journal: Investigaciones Regionales
ISSN 1695-7253

Issue: 2;
Start page: 141;
Date: 2003;
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Keywords: Okun’s law | business cycle | unemployment | asymmetry | regional economics

The Okun law for Andalusia and Spain is estimated using quarterly data (1984-2000). We take a VAR approach that allows us to unveil the different dynamic behaviour of the relationship between the output gap and the unemployment gap in the two economies, as well as the asymmetric nature of that relationship. Our findings also suggest that the lower responsiveness of the unemployment gap to the output gap in Andalusia is related to two main factors: the flows out of the labour force in recession are larger in Andalusia, and the higher share of the agrarian unemployment.

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