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Okun's Law in Australia

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  • Abbas Valadkhani

Abstract

type="main" xml:id="ecor12221-abs-0001"> This paper examines the dynamic behaviour of the Okun coefficient using quarterly data (1980Q3–2014Q1). It is found that a rise in labour productivity and a fall in output can increase unemployment. A 1 per cent reduction in the unemployment rate requires only a 2.4 per cent increase in real output growth above the average growth rate, but during recessions this figure increases to 4.53 per cent. The probability of observing a higher coefficient was limited to recessionary periods. Given that recessions are now less frequent, Okun's law continues to be a useful rule of thumb in Australia.

Suggested Citation

  • Abbas Valadkhani, 2015. "Okun's Law in Australia," The Economic Record, The Economic Society of Australia, vol. 91(295), pages 509-522, December.
    • Handle: RePEc:bla:ecorec:v:91:y:2015:i:295:p:509-522
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    File URL: http://hdl.handle.net/10.1111/ecor.2015.91.issue-295
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    Cited by:

    1. Valadkhani, Abbas & Smyth, Russell, 2015. "Switching and asymmetric behaviour of the Okun coefficient in the US: Evidence for the 1948–2015 period," Economic Modelling, Elsevier, vol. 50(C), pages 281-290.
    2. Porras-Arena, M. Sylvina & Martín-Román, Ángel L., 2023. "The heterogeneity of Okun's law: A metaregression analysis," Economic Modelling, Elsevier, vol. 128(C).

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