Testing for convergence of the Okun’s Law coefficient in Europe |
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Authors: | Roger Perman Christophe Tavera |
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Institution: | (1) Department of Economics, University of Strathclyde, Sir William Duncan Building, 100 Cathedral Street, Glasgow, UK;(2) University of Rennes 1, Rennes, France |
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Abstract: | Without convergence of macroeconomic parameters representative of the nature of adjustment mechanisms, even a common shock
to members of a monetary union can lead to different macroeconomic consequences across the union and, eventually, to the need
for more or less co-ordinated specific policies. In this paper, we test for the presence of convergence of the Okun’s Law
coefficient (OLC) among several alternative groupings of European economies. The empirical strategy adopted is based on the
evaluation of the time path of rolling regression estimates of the OLC for European countries. We then use a testing procedure
suggested by Evans Evans P (1996) J Econ Dynam Control 20:1027–1049] to investigate the convergence, or non-convergence,
of the OLC in several groups of European countries by examining how the cross-country variance of the OLC evolves over time
in these groups. A hypothesis of medium-term convergence of the OLC is rejected for most of the European country groups examined.
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Keywords: | Okun’ s Law Convergence European Union |
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