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Hélène Syed Zwick and S. Ali Shah Syed
''Augmented okun's law within the emu: working-time or employment adjustment? a structural equation model''
( 2016, Vol. 36 No.1 )
This paper examines the output-unemployment-working-time nexus within the European Monetary Union (EMU) with a dedicated focus on the impact of the Great Recession (2007-2013). Using recursive structural equation model (R-SEM) for the first time on this topic, we estimate an augmented Okun's law equation that includes the number of worked hours. The results confirm the existence of a significant and negative relation between output and unemployment and reveal a significant and positive relation between output gap and working-time. Three groups of countries according to the type of labour market response to an output variation have been identified. A first group characterized by a unilateral unemployment response, a second group characterized by a working-time response and a third group characterized by a complementary effect of both unemployment and working-time adjustment towards an output variation.
Keywords: Okun's law, European Monetary Union, Structural Equation Model, Great Recession, working-time
JEL: J6 - Mobility, Unemployment, and Vacancies: General
E1 - General Aggregative Models: General
Manuscript Received : Jun 23 2015 Manuscript Accepted : Mar 17 2016

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