Okun's Law and Potential Output

David Lancaster and Peter Tulip
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David Lancaster: Reserve Bank of Australia

RBA Research Discussion Papers from Reserve Bank of Australia

Abstract: We find that Okun's law provides a simple and accurate means of understanding and predicting changes in the unemployment rate in Australia. Okun's law also implies a rate of output growth consistent with stable unemployment, called the growth of potential output. Our estimates of potential output growth are imprecise and fluctuate over time. A recent estimate is a bit below 3 per cent a year, with a +/– one standard error band covering the range 2\textonequarter to 3\textthreequarters per cent. This is a percentage point or two below estimates from before the mid 1990s.

Keywords: Okun's law; potential output; unemployment (search for similar items in EconPapers)
JEL-codes: E24 E27 J64 (search for similar items in EconPapers)
Date: 2015-12
New Economics Papers: this item is included in nep-lab and nep-mac
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:rba:rbardp:rdp2015-14

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