A useful framework for linking labor and goods markets: Okun's law and its stability revisited

Mustafa Ismihan ()

Review of Keynesian Economics, 2016, vol. 4, issue 2, 175-192

Abstract: This paper introduces a useful framework for linking labor and goods markets. This framework enables us to provide a reasonable theoretical background to Okun's law and hence facilitates the decomposition of Okun's coefficient into several quantifiable and interpretable components that incorporate the main insights of Arthur Okun's original analysis and the traditional Keynesian view. The empirical decomposition exercise indicates that Okun's law has an inherent tendency to vary substantially over time and this provides a potential explanation to the empirical studies that have shed doubt on the stability of Okun's law.

Keywords: Okun's law; theoretical framework; Keynesian view; business cycles; output–unemployment relationship (search for similar items in EconPapers)
JEL-codes: C20 E24 E32 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:elg:rokejn:v:4:y:2016:i:2:p175.192

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