Journal of Applied Econometrics

Cyclical output, cyclical unemployment, and Okun's coefficient: A new approach

Journal Article

Abstract

Estimates of Okun's coefficient are obtained using new estimates of cyclical GNP and cyclical unemployment rates for the post‐war USA. Empirical estimates of the coefficient are near —0.25, somewhat smaller in magnitude than other recent estimates obtained applying similar econometric techniques to different estimates of cyclical output and unemployment. Tests fail to reject the hypothesis of parameter stability across an hypothesized break between the third and fourth quarters of 1973, suggesting similar relationships between cyclical output and unemployment both before and after the supply shocks of the 1970s.

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