Dissecting Okun's Law by Time and Frequency
14 Pages Posted: 13 Jul 2020
Date Written: May 20, 2020
The stability of Okun's Law mostly has been investigated over time. In this paper, we apply wavelet analysis to dissect the relationship between GDP growth and changes in the unemployment rate by time and frequency. The results show that coherence of GDP growth and changes in the unemployment rates at lower frequencies vanished with the Great Moderation. Coherence at higher frequencies shows an on-off pattern with a re-emergence of Okun's law during the Great Recession.
Keywords: Okun's law, wavelet analysis, US data
JEL Classification: C40, E24, E32
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