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Revisiting Okun's Law: An Hysteretic Perspective

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  • Schorderet, Yann

Abstract

Many developed countries have suffered from high unemployment rates during the last few decades. Beyond the economic and social consequences of this painful experience, the understanding of the mechanisms underlying unemployment still constitutes an important challenge. Focusing on one of its relevant determinants, we reexamine the link between output and unemployment. We show that the difficulty of detecting the close relationship between the two is due to a phenomenon of non-linearity. The asymmetric feature characterizing the data refers to a theory known as hysteresis.

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  • Schorderet, Yann, 2001. "Revisiting Okun's Law: An Hysteretic Perspective," University of California at San Diego, Economics Working Paper Series qt2fb7n2wd, Department of Economics, UC San Diego.
    • Handle: RePEc:cdl:ucsdec:qt2fb7n2wd
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