Okun’s law: evidence of 13 selected developed countries

This paper re-examines the validity of Okun’s Law for 13 selected developed countries over 1970–2013. λmaxand λtrace tests reveal cointegrating relationship between unemployment rate and real GDP growth in all countries except Germany. However, dynamic OLS estimates portray a somewhat different picture. The estimates of bivariate error-correction model (ECM) unveil that Okun’s Law is quite valid only for the USA and South Korea. At the same time, evidence is relatively weaker for Canada, Finland, France, Japan, Italy, The Netherlands, New Zealand, Sweden, UK and Australia. However, it is invalid for Germany. © 2015, Springer Science+Business Media New York.