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Okun's Law; Fit at 50?

Author

Listed:
  • Laurence M. Ball
  • Daniel Leigh
  • Prakash Loungani

Abstract

This paper asks how well Okun’s Law fits short-run unemployment movements in the United States since 1948 and in twenty advanced economies since 1980. We find that Okun’s Law isa strong and stable relationship in most countries, one that did not change substantiallyduring the Great Recession. Accounts of breakdowns in the Law, such as the emergence of“jobless recoveries,” are flawed. We also find that the coefficient in the relationship—the effect of a one percent change in output on the unemployment rate—varies substantially across countries. This variation is partly explained by idiosyncratic features of national labormarkets, but it is not related to differences in employment protection legislation.

Suggested Citation

  • Laurence M. Ball & Daniel Leigh & Prakash Loungani, 2013. "Okun's Law; Fit at 50?," IMF Working Papers 13/10, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:13/10
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Le chômage en zone euro, une histoire de ménages
      by ? in D'un champ l'autre on 2015-01-01 18:27:00

    Citations

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    Cited by:

    1. KARGI, Bilal, 2014. "Okun’s Law and Long Term Co-Integration Analysis for OECD Countries (1987-2012)," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 77-85.
    2. Björn Brey & Matthias S. Hertweck, 2016. "The extension of short-time work schemes during the Great Recession: A story of success?," Working Paper Series of the Department of Economics, University of Konstanz 2016-05, Department of Economics, University of Konstanz.
    3. Durech, Richard & Minea, Alexandru & Mustea, Lavinia & Slusna, Lubica, 2014. "Regional evidence on Okun's Law in Czech Republic and Slovakia," Economic Modelling, Elsevier, vol. 42(C), pages 57-65.
    4. Zwickl, Klara & Disslbacher, Franziska & Stagl, Sigrid, 2016. "Work-sharing for a sustainable economy," Ecological Economics, Elsevier, vol. 121(C), pages 246-253.
    5. Arayssi, Mahmoud, 2015. "Transparent rules for deposing central bankers," International Review of Economics & Finance, Elsevier, vol. 38(C), pages 1-17.
    6. van Ours, Jan C., 2015. "The Great Recession was not so great," Labour Economics, Elsevier, vol. 34(C), pages 1-12.
    7. Sandrine Cazes & Sher Verick & Fares Al Hussami, 2013. "Why did unemployment respond so differently to the global financial crisis across countries? Insights from Okun’s Law," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-18, December.
    8. Ryan W Herzog, 2013. "An Analysis of Okun's Law, the Natural Rate, and Voting Preferences for the 50 States," Economics Bulletin, AccessEcon, vol. 33(4), pages 2504-2517.
    9. Hawkins, Raymond J., 2017. "Macroeconomic susceptibility, inflation, and aggregate supply," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 469(C), pages 15-22.
    10. Antal, Miklós, 2014. "Green goals and full employment: Are they compatible?," Ecological Economics, Elsevier, vol. 107(C), pages 276-286.
    11. Richter, Kaspar & Witkowski, Bartosz, 2014. "Does growth generate jobs in Eastern Europe and Central Asia ?," Policy Research Working Paper Series 6759, The World Bank.
    12. Malikane, Christopher, 2012. "The microfoundations of the Keynesian wage-price spiral," MPRA Paper 42921, University Library of Munich, Germany, revised 29 Nov 2012.
    13. Valadkhani, Abbas & Smyth, Russell, 2015. "Switching and asymmetric behaviour of the Okun coefficient in the US: Evidence for the 1948–2015 period," Economic Modelling, Elsevier, vol. 50(C), pages 281-290.
    14. repec:eee:rujoec:v:3:y:2017:i:4:p:411-424 is not listed on IDEAS
    15. repec:wfo:monber:y:2018:i:1:p:53-61 is not listed on IDEAS
    16. repec:eee:enepol:v:118:y:2018:i:c:p:58-68 is not listed on IDEAS
    17. repec:eee:ecmode:v:69:y:2018:i:c:p:291-300 is not listed on IDEAS
    18. Cohen, Gail & Jalles, Joao Tovar & Loungani, Prakash & Marto, Ricardo, 2018. "The long-run decoupling of emissions and output: Evidence from the largest emitters," Energy Policy, Elsevier, vol. 118(C), pages 58-68.

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