Okun's Law


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Okun's Law

A theory stating that for every 1% increase in the unemployment rate, a country or region loses 2.5% potential GDP growth. See also: GDP.
References in periodicals archive ?
Giorgio Canarella and Stephen Miller, in "Did Okun's Law Die After the Great Recession," carefully examine the relationship between output and unemployment.
As discussed in section III, after adjusting for these differences, the two methods provide similar estimates of the growth decomposition, so our growth-accounting analysis focuses on the Okun's law method.
Theoretically Okun's law is the loop between the aggregate supply and Philips curve (Debelle and Laxton, 1997) and empirically it is "rule of thumb" for policy devising and forecasting (Harris and Silverstone, 2001).
Kennedy's Council of Economic Advisers, coined Okun's Law, which holds that for every three-point rise in GDP, unemployment will fall 1 percentage point.
Most likely this substitution is prompted by the common technique used in frontier research, which itself is justified by a simple Okun's Law to connect these two metrics.
To arrive at potential, researchers make some adjustments to the natural rate of unemployment and use Okun's law to transform unemployment into output.
The link between the unemployment rate and GDP growth is the so-called Okun's law (see Knoteck, 2007, also in relation to the estimation methods).
The fifth paper, by Mary Daly, John Fernald, Oscar Jorda and Fernanda Nechio, assesses cross-country evidence on labour market performance following the financial crisis through the lens of Okun's Law, the relationship between changes in the unemployment rate and output growth.
Okun's law revisited: should we worry about low unemployment, Economic Commentary 15: 1-4.
In section 2, we present evidence on estimates of Okun's law for Ireland and look at changes over time in employment and unemployment by detailed characteristics such as age and education.
Moosa (2008) tested Okun's law in selected Arab countries by estimating the relationship between economic growth and unemployment.
How much greater will determine the speed of improvement in the unemployment rate, according to a rule of thumb known as Okun's law.