Validity of Okun’s Law in a spatially dependent and cyclical asymmetric context

The current article analyzes the validity of Okun?s Law and sizable distortions that can occur in estimation when spatial dependence cyclical asymmetric impacts are not considered, which is a concern commonly ignored by existing literature. Primarily panel regressions (SDM, SAR, SEM) nonparametric along with specification tests adopted terms methodology (such as unit root tests, cointegration, Moran?s I Geary?s C global dependence, LM, Hausman tests). Additionally, heterogeneity cross-regional variation investigated adopting geographically weighted regression, LISA (local indicators for association), local analysis. A 26 Turkish NUTS-2 regions from 2004 to 2018 was analyzed. results clearly revealed failing incorporate proximity cycle leads biased coefficient, such during downswing years national economy, holds robustly: unemployment increases quickly response decline output. In contrast, upswing years, size coefficient relatively much lower. Moreover, sizably evident. demonstrated vary significantly across have different industrial labor market characteristics. As policy implication, it has been understood reduction more difficult than initially understood, economic growth itself does provide solution periods. necessary special region-specific policies discussed throughout text.