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Output trends and Okun's law

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  • Gert Schnabel

Abstract

This paper estimates trend growth rates for a sample of industrial countries by applying Okun's law in first differences. Despite the simplicity of the approach and the restrictive assumptions, the method typically yields reasonable results when trend shifts in the Okun coefficients and changes in structural unemployment are allowed for. Particular caution is required in using the method for estimating output gaps.

Suggested Citation

  • Gert Schnabel, 2002. "Output trends and Okun's law," BIS Working Papers 111, Bank for International Settlements.
  • Handle: RePEc:bis:biswps:111
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    References listed on IDEAS

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    1. Viren, Matti, 2001. "The Okun curve is non-linear," Economics Letters, Elsevier, vol. 70(2), pages 253-257, February.
    2. Kaufman, Roger T., 1988. "An international comparison of Okun's laws," Journal of Comparative Economics, Elsevier, vol. 12(2), pages 182-203, June.
    3. Prachowny, Martin F J, 1993. "Okun's Law: Theoretical Foundations and Revised Estimates," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 331-336, May.
    4. Claude Giorno & Pete Richardson & Deborah Roseveare & Paul van den Noord, 1995. "Estimating Potential Output, Output Gaps and Structural Budget Balances," OECD Economics Department Working Papers 152, OECD Publishing.
    5. Tiff Macklemr & James Yetman, 2001. "Productivity growth and prices in Canada: what can we learn from the US experience?," BIS Papers chapters,in: Bank for International Settlements (ed.), Empirical studies of structural changes and inflation, volume 3, pages 29-48 Bank for International Settlements.
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    Cited by:

    1. Islas C., Alejandro & Cortez, Willy Walter, 2013. "An assessment of the dynamics between the permanent and transitory components of Mexico's output and unemployment," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    2. Roel M. W. J. Beetsma & Xavier Debrun, 2004. "Reconciling Stability and Growth: Smart Pacts and Structural Reforms," IMF Staff Papers, Palgrave Macmillan, vol. 51(3), pages 431-456, November.
    3. José Brandão de Brito & Rita Duarte, 2005. "SEAM: A Small-Scale Euro Area Model With Forward-Looking Elements," Working Papers w200501, Banco de Portugal, Economics and Research Department.
    4. Christo Mavrov, 2007. "The Dependence between Unemployment and GDP in Bulgaria: Application of Direct and Reverse Regression," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 6, pages 45-65.
    5. Verick, Sher. & Islam, Iyanatul., 2010. "The great recession of 2008-2009 : causes, consequences and policy responses," ILO Working Papers 994576933402676, International Labour Organization.
    6. repec:ilo:ilowps:457693 is not listed on IDEAS

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