Economist’s View: Historical Patterns, Okun’s Law, and the Great Recession

July 10, 2011

Historical Patterns, Okun’s Law, and the Great Recession

Arin Dube shows that estimates of Okun’s law are inconsistent with the assertion that most of the unemployment problem is structural rather than cyclical:

Historical Patterns, Okun’s Law, and the Great Recession, by Arin Dube: After reading Paul Krugman’s post today, I decided to follow up by actually estimating out-of-sample unemployment rate change forecasts during the Great Recession based on a pre-2007 Okun’s law relationship (i.e., a regression of change in the unemployment rate on percentage change in real GDP).

This anchors the previous post.

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