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A useful framework for linking labor and goods markets: Okun's law and its stability revisited

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  • Mustafa Ismihan

    (Department of Economics, Atilim University, Ankara, Turkey)

Abstract

This paper introduces a useful framework for linking labor and goods markets. This framework enables us to provide a reasonable theoretical background to Okun's law and hence facilitates the decomposition of Okun's coefficient into several quantifiable and interpretable components that incorporate the main insights of Arthur Okun's original analysis and the traditional Keynesian view. The empirical decomposition exercise indicates that Okun's law has an inherent tendency to vary substantially over time and this provides a potential explanation to the empirical studies that have shed doubt on the stability of Okun's law.

Suggested Citation

  • Mustafa Ismihan, 2016. "A useful framework for linking labor and goods markets: Okun's law and its stability revisited," Review of Keynesian Economics, Edward Elgar Publishing, vol. 4(2), pages 175-192, April.
    • Handle: RePEc:elg:rokejn:v:4:y:2016:i:2:p175.192
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    Cited by:

    1. Oliva, Leobaldo Enrique Molero & Eduardo, Salcedo Muñoz Virgilio & Vásquez, John Alexander Campuzano & Copo, Holger Fabrizzio Bejarano, 2019. "Análisis econométrico del comportamiento del desempleo en el Ecuador (segundo trimestre 2007 a cuarto trimestre 2017)," Revista Tendencias, Universidad de Narino, vol. 20(2), pages 22-48, July.

    More about this item

    Keywords

    Okun's law; theoretical framework; Keynesian view; business cycles; output–unemployment relationship;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General

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