Unemployment and the GNP Gap: Okun's Law Revisited

Yu Hsing

Eastern Economic Journal, 1991, vol. 17, issue 4, 409-416

Abstract: This paper reexamines Okun's law by applying the Box-Cox transformation of variables. Major findings are that the effect of a change in the GNP gap on the unemployment rate varies from -0.280 in 1969.1 to -0.801 in 1982.4; the effect is larger (smaller) when the unemployment rate is higher (lower); and the linear form can be rejected at the 1 percent level. To reduce the unemployment rate by one percentage point in 1982.Q4, the author may overestimate the increase in actual real GNP by as much as $31 billion if an incorrect functional form is chosen.

Keywords: Okun's Law; Unemployment Rate; Unemployment (search for similar items in EconPapers)
JEL-codes: E23 E24 (search for similar items in EconPapers)
Date: 1991
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eej:eeconj:v:17:y:1991:i:4:p:409-416

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