<p>Does Okun's law work at all?  </p>

<p>It was an empirical observation of the relationship between unemployment and an estimate of the "output gap" (the relative difference between actual GDP and potential GDP)</p>

<p>To the extent that the relative difference between actual GDP and potential GDP may be the same whether calculated using nominal GDP or real GDP, then the relationship should hold either in both cases or in neither. Otherwise the argument becomes one of saying that the output gap is affected by inflation</p>

CC BY-SA 3.0
2017-12-17T16:22:06.510Z
Okuns law is the relationship between percentage change in quarterly unemployment and percentage change in quarterly GDP. Its useful for short run trend analysis.
EconJohn
CC BY-SA 3.0
2017-12-17T16:38:42.047Z
@EconJohn: Okun's 1962 paper "Potential GDP and its measurement" is, as its title suggests, about potential GDP.  He suggested three ways of estimating the gap, one of which was looking at quarterly changes in real GDP, another what he called *trial gaps* and the third *fitted trend and elasticity*.  He considered all three over the period 1954-1962, and their relationship with unemployment
Henry
CC BY-SA 3.0
2017-12-17T20:08:30.477Z
Link me to the paper I cant find it. from what I know Okuns law is a stylized macroeconomic fact:
https://www.researchgate.net/profile/Donald_Freeman/publication/225116273_Regional_tests_of_Okun's_law/links/00b4952924dbedfc2c000000.pdf
EconJohn
CC BY-SA 3.0
2017-12-17T20:17:55.257Z
@EconJohn https://web.archive.org/web/20030502204106/http://cowles.econ.yale.edu/P/cp/p01b/p0190.pdf
Henry
CC BY-SA 3.0
2017-12-17T15:05:54.007Z
2017-12-17T15:05:54.007Z
Henry
<p>Does Okun's law also work for nominal (not real) GDP growth?</p>

<gdp><unemployment>
Okun's law nominal GDP growth
Cardinal
# Okun's law nominal GDP growth

(Asked by: username_0 on 2017-12-09)

Does Okun's law also work for nominal (not real) GDP growth?

**Tags:** gdp, unemployment

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## 1 answers

### Answer by username_1 on 2017-12-17. Score: -1

Does Okun's law work at all?

It was an empirical observation of the relationship between unemployment and an estimate of the "output gap" (the relative difference between actual GDP and potential GDP)

To the extent that the relative difference between actual GDP and potential GDP may be the same whether calculated using nominal GDP or real GDP, then the relationship should hold either in both cases or in neither. Otherwise the argument becomes one of saying that the output gap is affected by inflation

> **Comments:**
> **username_2**: Okuns law is the relationship between percentage change in quarterly unemployment and percentage change in quarterly GDP. Its useful for short run trend analysis.  
> **username_1**: @EconJohn: Okun's 1962 paper "Potential GDP and its measurement" is, as its title suggests, about potential GDP.  He suggested three ways of estimating the gap, one of which was looking at quarterly changes in real GDP, another what he called *trial gaps* and the third *fitted trend and elasticity*.  He considered all three over the period 1954-1962, and their relationship with unemployment  
> **username_2**: Link me to the paper I cant find it. from what I know Okuns law is a stylized macroeconomic fact: https://www.researchgate.net/profile/Donald_Freeman/publication/225116273_Regional_tests_of_Okun's_law/links/00b4952924dbedfc2c000000.pdf  
> **username_1**: @EconJohn https://web.archive.org/web/20030502204106/http://cowles.econ.yale.edu/P/cp/p01b/p0190.pdf  

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