From the beginning of 2003 through the first quart

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How Useful Is Okun’s Law?: A Reprint from theFederal Reserve Bank of Kansas City “Economic Review”

From the beginning of 2003 through the first quart

Our Price: $15.00

By Edward S. Knotek, II (au)
Year: 2007
Pages: 30
Binding Paperback

Product Code: 1428988912

Description

From the beginning of 2003 through the first quarter of 2006, real gross domestic product in the U.S. grew at an average annual rate of 3.4% As expected, unemployment during the period fell. Over the course of the next year, average growth slowed to less than half its earlier rate -- but unemployment continued to drift downward. This situation presented a puzzle, who expected the unemployment rate to increase as the economy slowed. This negative correlation between GDP growth & unemployment has been named “Okun’s law.” This article considers the usefulness of Okun’s law for policymakers & economists. Okun’s relationship can be useful as a forecasting tool -- provided that one takes its instability into account. Charts & tables.

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