Is the response of the Slovak labor market asymmetric to output changes?

Abstract

The accession to the European Union, several external shocks, and the questionable state interventions in the country's business environment significantly impacted economic development of Slovakia. These phenomena were reflected in both the economic and social situation, namely the level of Gross domestic product (GDP) and rate of unemployment. The goal of our paper is to analyze the possible asymmetries in the unemployment-output relationship according to the Okun's law. We used quarterly data to apply static and dynamic models in their symmetric and asymmetric forms (2009 Q1 – 2023 Q3). The results suggest that the labor market reacts more noticeably to GDP contraction than to GDP expansion. The outcomes are of interest to governing bodies managing labor market policy, primarily in the economic downturn, and for banks in controlling interest rates and inflation.