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Abstract

Arthur Okun claimed that when a country’s unemployment rate fell, the GDP expanded. This paper investigates the claim of Arthur Okun and the effect of unemployment rates and GDP of a country on each other. Data from three countries, namely, USA, Japan, and France, were tested to see if there was a causal link between the two variables. It was found that the proposed law of Arthur Okun did not hold. In the USA, there was a two way causality link but different directions of effect. France and Japan did not have a causal link between the two variables.

Recommended Citation

White, M. J., & Chu, L. Y. (2013). Does Okun’s law still hold today? Lingnan Journal of Banking, Finance and Economics, 4. Retrieved from http://commons.ln.edu.hk/ljbfe/vol4/iss1/2