Institutional Affiliation: International Monetary Fund
|Okun's Law: Fit at Fifty?|
with , : w18668
This paper asks how well Okun's Law fits short-run unemployment movements in the United States since 1948 and in twenty advanced economies since 1980. We find that Okun's Law is a strong and stable relationship in most countries, one that did not change substantially during the Great Recession. Accounts of breakdowns in the Law, such as the emergence of "jobless recoveries," are flawed. We also find that the coefficient in the relationship - the effect of a one percent change in output on the unemployment rate - varies substantially across countries. This variation is partly explained by idiosyncratic features of national labor markets, but it is not related to differences in employment protection legislation.
|Globalization and Inflation-Output Tradeoffs|
with : w11641
We demonstrate how capital account and trade account liberalizations help reduce inefficiencies associated with the fluctuations in the output gap, relative to the inefficiencies associated with the fluctuations in inflation. With capital account liberalization the representative household is able to smooth fluctuations in consumption, and thus becomes relatively insensitive to fluctuations in the output gap. With trade liberalization the economy tends to specialize in production but not in consumption. The correlation between fluctuations in the output gap and aggregate consumption is therefore weakened by trade openness; hence a smaller weight on the output gap in the utility-based loss function, compared to the closed economy situations.A key implication of the theory is that globalizat...
Published: NBER International Macro Annual, MIT Press, May 2007.
|Globalization and Equilibrium Inflation-Output Tradeoffs|
in NBER International Seminar on Macroeconomics 2005, Jeffrey A. Frankel and Christopher Pissarides, editors