Okun´s Law over the Business Cycle: Does it Change in the EU Countries after the Financial Crisis?

Marcel Novák and Ľubomír Darmo

Prague Economic Papers, 2019, vol. 2019, issue 2, 235-254

Abstract: The relationship between economic growth and unemployment is well known. The growth of gross domestic product leads to a fall in unemployment and, reversely, its fall is associated with a rise in unemployment. The paper deals with the estimation of Okun's coefficient for EU28 countries between years 2001 and 2014. Additionally, two sub-periods are also analysed. These represent the pre-crisis period 2001-2007 and the post-crisis period 2008-2014. The result shows higher Okun's coefficient in the post-crisis period. Unemployment in that period responded to changes in gross domestic product more sensitively than in the pre-crisis period. As a result, in order to decrease unemployment, lower economic growth was necessary in the post-crisis period compared to the pre-crisis one.

Keywords: business cycle; unemployment; Okun's law (search for similar items in EconPapers)
JEL-codes: E24 E32 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (6)

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DOI: 10.18267/j.pep.694

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