The using Okuns law to track and analyze the changes in the Research Paper

The using Okuns law to lead-in and analyze the changes in the unemployment rates all over the fail decade - Research Paper Example take and employment have a tendency to more simultaneously. In 1962, Arthur Okun conducted an empirical research over the semblance between changes in unemployment to the changes in gross national product in US economy.The Using Okuns law to track and analyze the changes in the unemployment rates over the last decade.He found that for every 3 percent increase in real getup of the country, unemployment decreased by 1 percent. The observers of this result started to dub it as Okuns Law. Thus for the coupled States, Okun coefficient is 3. It washbowl logically be expected the extinctput of a country to approximately move one for one with the level of employment. Okun, however, argued that Measures unemployment is less volatile to both economic change than output. This is for, according to him, pas seuls in working hours and labor force participati on generally inter underemployment to some extent. (Okun, 1962). Okun coefficients ar not same for all countries. It has been found by the economists that most of the developed or change nations of the world have higher Okun coefficients than United States. It simply implies that, in most of the other industrialized nations of the world the rates of unemployment have a tendency to vary less for a given fluctuation in gross domestic product than in case of the United States. A reason for this could be that in United States labor grocery is less regulated than in other countries and hence companies can more easily lay off their workers during economic slowdowns. In most of the industrialized countries, there are stronger implicit job protections by the societies, stronger unions, and higher governmental restrictions on laying off workers than in United States. (Kaufman, 1988 Moosa, I. A.(1997) However, over the years, many industrialized countries have undertaken various reform me asures to reduce restrictions on labor market so that companies can exercise more freedom in laying off workers at the cartridge clip of economic down excise. Thus, Okun coefficients of many industrialized countries like UK, Canada, Germany, Japan, France and so on have been lowered in fresh time than before. However, USA still has the gargantuanst Okun coefficient. (Kaufman, 1988 Moosa, I. A.(1997) One interesting thing about Okun coefficient is that it can change over time as the relationship between output growth and change in unemployment depends to a large extent on a number of other factors like technology, social regulations, demographics, laws, etc. As these factors change, Okun coefficient ability also change. (Lee, 2000). Here this Okuns law will be used to analyze the movement in the rate of unemployment in US over the last decade. Here an attempt will be make to find out whether Okun coefficient is still the same in US as documented by Arthur Okun. The last decade ha s experienced huge economic fluctuation, and hence it would be quite interesting to find out the value of Okun coefficient under such economic slow down in US. At present, most of the economies without the world are going through a critical phase of corner and among all the economies. The item has been so critical that the most power economies in the world also have not been capable to escape this economic crisis. Economies of U.S., Japan, China, U.K. etc are all suffering from severe demand crunch and consequently fall in production and employment. U.S. is the Worst hit country by the current recession. The ongoing economic crisis through out the whole world owes it origin in U.S. following a huge credit crisis in the home loan market. Since early 2008, the U.S. economy has been looming under recession. Many economists are even off of the opinion that this recession has started during the last quarter of 2007 itself. The effect of recession has not been confined to U.S. economy only. In late 2007 and even early 2008, most of the stock market indices across the world were touching the sky. Under such scenario, corporeal houses were showing over enthusiasm and in several of countries money was flowing in huge