Munich Personal RePEc Archive

Regional differences in the Okun’s Relationship: New Evidence for Spain (1980-2015)

Bande, Roberto and Martín-Román, Ángel L. (2017): Regional differences in the Okun’s Relationship: New Evidence for Spain (1980-2015).

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Abstract

This paper provides new empirical evidence on the relationship between the unemployment rate and the output growth in Spain at the regional level. The “gap version” with the output growth on the left-hand side of the equation is our benchmark model. We observe in our estimates that all coefficients are significant and show the expected negative sign. Significant regional differences in the Okun’s relationship, both for the short run and the long run, are found. These results are robust to two different specifications for the gaps: the HP filter and the QT procedure. In the final part of the paper, we also find that the OLS and the GMM estimates for panel data exhibit a similar pattern and that there is a clear asymmetry in the Okun’s relationship in booming and recession phases of the Spanish business cycle.

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