Agus Widarjono

Department of Economics, 

Faculty of Business and Economics, Universitas Islam Indonesia, Yogyakarta, Indonesia

E-mail:

agus.widarjono@uii.ac.id

Asymmetric Okun's law in an emerging market: ASEAN-3 case

Abstract. This study examines the force of the asymmetric Okun's law in Malaysia, the Philippines, and Singapore (the ASEAN-3). We employ the cointegration test using the nonlinear autoregressive distributed lag (NARDL) and the asymmetric Pooled Mean Group (PMG) model. Our findings conclude that the cointegration between unemployment and output is found, and the asymmetric Okun's law exists in all the countries under consideration. This suggests that economic upturn and downturn have different impacts on the unemployment in the ASEAN-3. More importantly, economic downturns have a larger impact on unemployment than economic booms. However, positive or negative long-run asymmetric Okun varies across the countries. The Philippines created more jobs during an economic upturn and Singapore lost more jobs during an economic downturn than other countries.  The asymmetric PMG confirms that rising and falling domestic output has a significant impact on unemployment. The asymmetric panel also proves that economic downturns have a stronger impact on unemployment than economic upturns in the ASEAN-3.

Received: October, 2019

1st Revision: April, 2020

Accepted: September, 2020

DOI: 10.14254/2071-789X.2020/13-3/12

JEL Classification: C22, C23, E32, J64

Keywords: Okun's law, NARDL, asymmetric panel cointegration, ASEAN-3