Social Sciences
Economics
1962
IntermediateOkun's Law
GDP growth and unemployment move inversely — roughly 2% output per 1% unemployment gap.
By Arthur Okun
Social Sciences
Okun's Law
1962 · Arthur Okun
Why it matters: Gives central banks a quick read on slack in the economy.
Discoverers: Arthur Okun (1962)
What does it mean?
GDP growth and unemployment move inversely — roughly 2% output per 1% unemployment gap.
Why should I care?
Gives central banks a quick read on slack in the economy.
Variables & Units
| Symbol | Name | Unit | Meaning |
|---|---|---|---|
| Output growth | — | Percent | |
| Unemployment | — | Rate | |
| Natural rate | — | NAIRU | |
| Okun coefficient | — | ~2 |
Worked Example
Unemployment 1% above u* → output ~2% below potential.
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Okun's Law
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GDP growth and unemployment move inversely — roughly 2% output per 1% unemployment gap.
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