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An unstable Okun’s Law, not the best rule of thumb

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  • Brent Meyer
  • Murat Tasci

Abstract

Okun’s law is a statistical relationship between unemployment and GDP that is widely used as a rule of thumb for assessing the unemployment rate—why it might be at a certain level or where it might be headed, for example. Unfortunately, the Okun’s law relationship is not stable over time, which makes it potentially misleading as a rule of thumb.

Suggested Citation

  • Brent Meyer & Murat Tasci, 2012. "An unstable Okun’s Law, not the best rule of thumb," Economic Commentary, Federal Reserve Bank of Cleveland, issue June.
  • Handle: RePEc:fip:fedcec:y:2012:i:june7:n:2012-8
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    Cited by:

    1. repec:cmn:journl:y:2017:i:2:p:97-110 is not listed on IDEAS
    2. de la Fonteijne, Marcel R., 2014. "Okun's Law, Dead or Alive: A Fundamental Approach," MPRA Paper 83911, University Library of Munich, Germany.
    3. repec:taf:apeclt:v:23:y:2016:i:6:p:436-439 is not listed on IDEAS
    4. Anderton, Robert & Aranki, Ted & Bonthuis, Boele & Jarvis, Valerie, 2014. "Disaggregating Okun's law: decomposing the impact of the expenditure components of GDP on euro area unemployment," Working Paper Series 1747, European Central Bank.
    5. Luz A. Flórez & Karen L. Pulido-Mahecha & Mario A. Ramos-Veloza, 2018. "Okun´s law in Colombia: a non-linear cointegration," Borradores de Economia 1039, Banco de la Republica de Colombia.
    6. Albers, Scott, 2013. "Okun’s Law as a Pi-to-1 ratio: A harmonic / trigonometric theory as to why Okun’s Law works," MPRA Paper 46633, University Library of Munich, Germany.
    7. Laurence M. Ball & Daniel Leigh & Prakash Loungani, 2013. "Okun's Law: Fit at Fifty?," NBER Working Papers 18668, National Bureau of Economic Research, Inc.
    8. repec:prg:jnlaop:v:2018:y:2018:i:4:id:609:p:12-29 is not listed on IDEAS

    More about this item

    Keywords

    Gross domestic product ; Unemployment;

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