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Okun loops and anelastic relaxation in the G7

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  • Hawkins, Raymond J.
  • Li, Yichu

Abstract

We show that Okun loops – loop deviations from Okun’s law – are an expected outcome of extending Okun’s law to allow for observed time dependence in the response of unemployment to a change in output, and are an example of anelastic relaxation in economics. We extend prior work on these loops by documenting their regular appearance in the United States economy since WWII and their appearance in all G7 countries. We also find that the anelastic form of Okun’s law provides a statistically significant and operationally parsimonious representation of output–unemployment dynamics in all G7 countries.

Suggested Citation

  • Hawkins, Raymond J. & Li, Yichu, 2021. "Okun loops and anelastic relaxation in the G7," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 576(C).
    • Handle: RePEc:eee:phsmap:v:576:y:2021:i:c:s0378437121003204
    DOI: 10.1016/j.physa.2021.126047
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    References listed on IDEAS

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    1. A. W. Phillips, 1958. "The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861–1957," Economica, London School of Economics and Political Science, vol. 25(100), pages 283-299, November.
    2. Laurence Ball & Davide Furceri & Daniel Leigh & Prakash Loungani, 2019. "Does One Law Fit All? Cross-Country Evidence on Okun’s Law," Open Economies Review, Springer, vol. 30(5), pages 841-874, November.
    3. Thomas Obst, 2022. "Dynamic version of Okun’s law in the EU15 countries—The role of delays in the unemployment‐output nexus," Scottish Journal of Political Economy, Scottish Economic Society, vol. 69(2), pages 225-241, May.
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