OKUN’S LAW DURING THE 21ST CENTURY : A Comparison of 8 OECD Countries over a 20-year period

Abstract: This paper looks at how well Okun’s law holds using recent quarterly data from 2000 to 2020 for 8 OECD countries. The dynamic version of Okun’s law is used which explores the delay and strength of the effect from changes in economic growth on the unemployment rate. The paper also explores if employment protection laws can affect the relationship. The results suggests that Okun’s law is still present but has undergone some changes from the past. The delay of the effect on the unemployment rate is found to differ between nations. Stricter employment protection laws seem to make the trade-off weaker seen in the Okun’s coefficient when GDP growth is lagged by one quarter.