Okun's Law: Fit at 50?
This paper asks how well Okunâ€™s Law fits short-run unemployment movements in the United States since 1948 and in twenty advanced economies since 1980. We find that Okunâ€™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 ofâ€œjobless recoveries,â€ are flawed. We also find that the coefficient in the relationshipâ€”the effect of a one percent change in output on the unemployment rateâ€”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.
|Date of creation:||14 Jan 2013|
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