A cointegration analysis of the okun law in Colombia : An approach using non-linear smooth transition autoregressive models

Abstract

The intended research estimated the Okun’s relationship for Colombia with a STAR procedure, in which the variable capable of enabling the transition was the long-run disequilibrium term. The study postulates two different regimes that characterize Colombian economy with the nonlinearity approach of the Okun’s Law: A High regime and a Low regime. The periods in which each state of nature took place where determined and the economic conjuncture that lead to them was explored. The results suggested an improvement of the non- linear analysis of Okun’s Law, as well as that employment indeed is linked with economic growth. This could contribute the construction of a correct design, implementation and effectiveness of future policies in the country.