Unemployment and the GNP Gap: Okun's Law Revisited
AbstractThis paper reexamines Okun's law by applying the Box-Cox transformation of variables. Major findings are that the effect of a change in the GNP gap on the unemployment rate varies from -0.280 in 1969.1 to -0.801 in 1982.4; the effect is larger (smaller) when the unemployment rate is higher (lower); and the linear form can be rejected at the 1 percent level. To reduce the unemployment rate by one percentage point in 1982.Q4, the author may overestimate the increase in actual real GNP by as much as $31 billion if an incorrect functional form is chosen.
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Bibliographic InfoArticle provided by Eastern Economic Association in its journal Eastern Economic Journal.
Volume (Year): 17 (1991)
Issue (Month): 4 (Oct-Dec)
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More information through EDIRC
Okun's Law; Unemployment Rate; Unemployment;
Find related papers by JEL classification:
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Seaks, Terry G & Layson, Stephen K, 1983. "Box-Cox Estimation with Standard Econometric Problems," The Review of Economics and Statistics, MIT Press, vol. 65(1), pages 160-64, February.
- Paul D. Thistle & John P. Formby, 1988. "On One Parameter Functional Forms for Lorenz Curves," Eastern Economic Journal, Eastern Economic Association, Eastern Economic Association, vol. 14(1), pages 81-85, Jan-Mar.
- Smyth, David J & Dua, Pami, 1988. "Public Perceptions of Macroeconomic Policy: An Econometric Analysis of the Reagan Presidency," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 357-61, May.
- Spitzer, John J, 1982. "A Primer on Box-Cox Estimation," The Review of Economics and Statistics, MIT Press, vol. 64(2), pages 307-13, May.
- Domicián Máté, 2010. "Estimating Labour Market Performance in Twenty-Three OECD Countries, 1980-2009," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 13(38), pages 213-232, December.
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