2010 Student Research Conference:
23rd Annual Student Research Conference

On the Variability of Okun's Law
Benjamin C. Anderson
Dr. Terry Olson, Faculty Mentor

A fundamental concept in modern macroeconomic theory is the relation between short-run economic growth and unemployment, as often described through the classic equation of Okuns Law. While simple for an economic model, it provides key insight into why business cycles are so pivotal to an economy. Most often, however, this equation is given as a static model with a clear coefficient and constant, with the coefficient representing how much employment changes due to a given change in economic growth, represented by a countrys GDP, and the constant representing the natural rate of unemployment. This research shows that this is clearly not the case. Through studying all American business cycles following World War II, empirical analysis shows that not only has the natural rate of unemployment changed from period to period, but the very relation itself has changed greatly from business cycle to business cycle.

Keywords: Employment, Business Cycles, Recession, Okun's Law, Short-Run Dynamics, macroeconomics, Unemployment

Topic(s):Economics
Business Administration

Presentation Type: Oral Paper

Session: 54-3
Location: MG 2090
Time: 3:15

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