Digital Okun’s law: A case study of ASEAN-10 economies

(200 word at most)For the block of 10 ASEAN economies over the period 1991–2022, the paper studies the co rresponsiveness between unemployment and output over the business cycle articulated in Okun’s law. As an empirical relationship, Okun’s law is believed to fit stable and developed economic conditions, and for ASEAN economies whose performance has taken off in the past decades this is just an acid test. Since digitalization is often foregrounded amogst the drivers behind the economic success of ASEAN, the analytical design based upon a model with systematically varying coefficients is tailored to isolate and capture effects of digitalization upon Okun’s law. Only for Malaysia and Thailand Okun’s law is found to hold for both the difference and gap version, for other ASEAN economies Okun’s law holds only for the difference version, or the results are somewhat inconclusive. Digitalization contributes by more than 21% to the temporal variability in Okun’s law, and other factors encompass structural indicators or unemployment levels. Overall, Okun’s law, when found significantly valid, is weaker than for advanced Western economies. • Okun’s law is studied for the ASEAN economies for the period 1991–2022. • The analysis of Okun’s law is framed so as to measure the effects of digitalization. • Digitalization explaines more than 21% of the temporal variability in Okun's law. • Overall, Okun’s law is weaker and less regular than for advanced Western economies. • A single-stage estimation-examination method is proposed that treats for endogeneity.