Open AccessOkuns Law Revisited: Evidence From OECD Countries
Author(s) -
Bakhtiar Moazzami,
Bahram Dadgostar
Publication year - 2011
Publication title -
the international business and economic research journal/the international business and economics research journal
Language(s) - English
Resource type - Journals
eISSN - 2157-9393
pISSN - 1535-0754
DOI - 10.19030/iber.v8i8.3156
Subject(s) - economics , okun's law , unemployment , unemployment rate , short run , macroeconomics , cointegration , econometrics
Okuns law is one of the most enduring stylistic facts in macroeconomics. The inverse relationship between the unemployment rate and the growth rate of real output, known as Okuns law, has important implications for macroeconomic policy, particularly in determining the optimal and desirable growth rate of output. This paper examines this relationship within an error correction modelling framework which tests the relationship as a long-run relationship while allowing short-run deviations from long-run equilibrium to take place. Using quarterly data for 13 OECD countries covering the period from 1988.I to 2007:IV, we find overwhelming support for Okuns law.