DOCSLIB.ORG

Economic Growth and Unemployment: a Reappraisal of the Conventional View

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Economic Growth and Unemployment: a Reappraisal of the Conventional View Economic Growth and Unemployment: A Reappraisal of the Conventional View JOHN A. TATOM t J~HEunemployment experience of the 1970s stands the simplicity of Okun’s Law, as well as its purported in marked contrast to the possibilities for unemploy- success in explaining and forecasting the unemploy- ment and growth which had been envisioned by ment rate, has led to its widespread acceptance.4 most analysts and policymakers at the end of the While Okun’s Law has provided some insights for 1960s. At that time, most observers agreed that out- analysis of aggregate economic activity, unquestioned put could not continue to grow as fast, or the acceptance of the original empirical specification of unemployment rate remain as low, as in the late 1960s without an accelerating rate of inflation. the relationship has been unwarranted. Gloser exam- ination indicates that the original specification does Nonetheless, maintaining an unemployment rate of not provide an accurate view of the link between about 4 percent and achieving a4 percent annual changes in the nation’s output •and unemployment. growth rate of the nation’s output •of goods and services appeared to be a realistic expectation.1 This relationship between output growth and un- employment can be revised to capture more accu- Except during 1973, however, the unemployment rate rately the empirical link which existed in the 1950s has been markedly higher over the past eight years and 1960s, and which continues to hold. Even the than during the prior decade. revised relationship is shown to provide only a The explanation offered for such apparently exces- rough explanation of the level of the unemployment rate, Nevertheless, variations in the rate of growth of sive unemployment is often quite simple — insuffi- cient demand for national output.2 This view of the the nation’s output are a sufficiently dominant factor unemployment-aggregate demand relationship draws that the revised rule provides a reliable tool for fore- support from an investigation of the link between casting changes in the unemployment rate. A signifi- changes in the unemployment rate and output growth cant implication of this reappraisal is that judgements in the l95Os and early 1960s.3 The underlying em- concerning economic performance and the role of pirical relationship, embodied in what has come to activist demand management policies based upon the be called “Okun’s Law,” was originally intended to level of, or changes in, the unemployment rate are provide a means of identifying the loss of national out- put associated with unemployment. While more de- ~This popularity is illustrated by George L. Perry’s remark that “Okun’s Law ... is probably the most robust macro- tailed methods have been developed for this purpose, economic relationship yet developed,” in “Potential Output: Recent Issnes and Present Trends,” U.S. Productive Capacity: Estimating The Utilization Gap (St. Louis: Washington t See, for example, Arthur M. Oknn, The Political Economy of University Center for the Study of American Business, 1977), p. 1; and Otto Eekstein’s remark in his comment on George Prosperity (Washington, D.G.: lirookings Institntion, 1970), especially pp. 60 and 100-02. L. Perry, “Potential Output and Productivity,” Brookings Papers on Economic Activity (1:1977), pp. 54-55, “It re- 2Two of the stronger recent statements of this view may be mains as true today as it was a decade ago that Oknn’s Law found in James Tobin, “How Dead is KeynesP” Economic is the best predictor of aggregate unemployment.” Also, the Inquiry (October 1977), pp. 459-68, and Arthur M. Okun, unemployment rate in the St. Louis Model has been deter- “The Great Stagfiation Swamp,” Challenge (November/De- mined by an Okun’s Law relationship relating the nssemploy- cember 1977), pp. 6-13. ment rate to current and one quarter lagged values of the GNP gap. See Leonali G. Andersen and Keith M. Carison, ~Arthur M. Okun, “Potential GNP: Its Measnrement and “A Monetarist Model for Economic Stabilization, this Re- Significance,” in American Statistical Association, Proceedings view (April 1970), pp. 9 and 14, and Roger W. Spencer, of the Business and Economic Statistics Section, 1962, pp. “Population, The Labor Force, and Potential Output: Impli- 98-104, and reprinted in The Political Economy of Prosperity, cations for the St. Louis Model,” this Review (February pp. 132-45. 1971), pp. 15-23. Page 18 FEDERAL RESERVE BANK OF ST. LOUIS OCTOBER 1978 Unemployment Rate Per,,,! Adj~d,d Perc,,,t IC ir 10 ~IliM ~IftJ!]tft~ 1lIi~!jllft’J]!ftI~~~ I II I] — C 9953 1954 9955 1956 1957 9958 1959 1960 1961 1962 9963 1964 1965 1966 1967 1968 1969 1970 9971 1972 1973 9974 9975 1976 1977 1978 Sh,ded ,,,~,,,pr’,’,’tp,,i’d’~~bv,denre,e,,i,,& ~ U.5 d&e pIe”d; J’d seriously biased by the acceptance of the original of the size of the gap between actual and potential specification of Okun’s Law. output. Since Okun’s original work, measures of potential What Is Okun’s Law? output have been developed which take into account In his original article, Okun used several statistical additional factors such as the use of capital and techniques to assess the relationship between unem- energy resources which affect productivity and po- ployment and aggregate output in order to establish tential output.° Nonetheless, the use of the Okun’s a measure of the output which could be produced Law relationship as a means of explaining (or at under conditions of “full employment.” The tech- least forecasting) the unemployment rate remains niques used involved relating first differences of un- relatively widespread.~ employment to the growth rate of output, using var- Some of the difficulties with the original specifica- ious measures of the gap between potential and actual tion of Okun’s Law may he seen by an estimate of output, and using a linear logarithmic relationship be- equation (1) using quarterly data from 1/1953 tween employment and output and time. The bench- through 111/1977. Two alternative measures of po- mark assumption was that full employment and, thus, tential output are used to measure the GNP gap; the production at the economy’s “potential output” rate, first, that of the Gouncil of Economic Advisers occurred at an unemployment rate of 4 percent. The (GEA), and the second based upon updated quar- study concluded that each percentage point of unem- terly estimates by Rasche and Tatom,8 ployment above 4 percent of the labor force implied a 3 percent “gap” of lost output.5 This relationship 6 can be summarized as: See the discussion of the literature on potential output meas- ures in Robert H. Rasche and John A. Tatom, “Energy Re- sources and Potential GNP,” this Review (June 1977), pp. (1) U = 4.0 + 1/3 GAP 10-24, especially pp. 10-13. ~Aceordingto equation (1), changes in the unemployment where Uisthe overall unemployment rate and GAP rate depend upon changes in the gap, which in turn depends is the percentage excess of potential over actual out- on the difference between the rate of change in potential put. When the economy’s unemployment rate differs output (economic growth) and the rate of change in actual output. Since the unemployment rate is equally responsive from 4 percent, the equation allows a calculation to a decrease in the rate of economic growth or an increase in the rate of change of actual output, the response of the unemployment rate to either is discussed here using the terms 5 economic growth and the rate of change of actual output Okun, “Potential GNP,” p. 100, points out that the 3toI interchangeably. link between output growth and the unemployment rate is 8 approximate, His “own subjectively weighted average of the See Peter K. Clark, “A New Estimate of Potential Output,” relevant coefficients” implies a gap coefficient in the equation U.S. Congress, Joint Economic Committee, Hearings on the equal to 0.3125, slightly lower that the one-third figure used Economic Report of the President, 95th Cong., 1st sess., Janu- here. ary 19, 1977, pp. 39-54; and Robert H. Rasche and John A. Page 17 FEDERAL RESERVE BANK OF ST. LOUIS OCTOBER 1978 (2) U = 4.58 + .325 CAP (CEA measure) (20.57)( 12.55) Table I = .96 SE. = .279 D.W. = 1.32 ~ = .87 An Estmate of the Full-Employment (3) U = 4.99 + .359 CAP (Rasche-Tatommeasure) Unemployment Rate (1l.56)( 14.35) Year .!~!! Year Rate RO==,97 S.E,=,250 D.W.= 1.32 ~=,94 Both equations indicate constants which are sig- 1950 4.0 1964 4.4 nificantly above the 4 percent level used in the 1951 3.9 1965 4.4 original law (t-statistics are shown in parentheses). 1952 3.7 1966 4.4 Moreover, both equations indicate significant serial 1953 3.6 1967 4.4 1954 3.8 1968 4.5 correlation of the errors, even though allowance is made for a first-order autoregressive scheme. Also, 1955 4.0 1969 4.5 when the rho-statistic is close to unity, the appropriate 1956 4.0 1970 4.5 statistical procedure is estimation of the coefficients 1957 4.0 197! 4.6 using a first-difference form, which in this case would 1958 4.0 1972 4.8 mean that changes in the unemployment rate are re- 1959 4.? 1973 4.8 lated to changes in the GNP gap.9 1960 4.1 1974 4.8 196! 4.1 1975 4.8 The only change in the original statement of the 1962 4.2 1976 4.9 relationship which has become widely agreed upon 1963 4.3 is that the unemployment rate at full employment S cc Ue,.,,’t I.
Load more

Recommended publications
  • The Role of Monetary Policy in the New Keynesian Model: Evidence from Vietnam
    The role of monetary policy in the New Keynesian Model: Evidence from Vietnam By: Van Hoang Khieu William Davidson Institute Working Paper Number 1075 February 2014 The role of monetary policy in the New Keynesian Model: Evidence from Vietnam Khieu, Van Hoang Graduate Student at The National Graduate Institute for Policy Studies (GRIPS), Japan. Lecturer in Monetary Economics at Banking Academy of Vietnam. Email: [email protected] Cell phone number: +81-8094490288 Abstract This paper reproduces a version of the New Keynesian model developed by Ireland (2004) and then uses the Vietnamese data from January 1995 to December 2012 to estimate the model’s parameters. The empirical results show that before August 2000 when the Taylor rule was adopted more firmly, the monetary policy shock made considerable contributions to the fluctuations in key macroeconomic variables such as the short-term nominal interest rate, the output gap, inflation, and especially output growth. By contrast, the loose adoption of the Taylor rule in the period of post- August 2000 leads to a fact that the contributions of the monetary policy shock to the variations in such key macroeconomic variables become less substantial. Thus, one policy implication is that adopting firmly the Taylor rule could strengthen the role of the monetary policy in driving movements in the key macroeconomic variables, for instance, enhancing economic growth and stabilizing inflation. Key words: New Keynesian model, Monetary Policy, Technology Shock, Cost-Push Shock, Preference Shock. JEL classification: E12, E32. 1 1. Introduction Explaining dynamic behaviors of key macroeconomic variables has drawn a lot of interest from researchers.
    [Show full text]
  • Deflation: a Business Perspective
    Deflation: a business perspective Prepared by the Corporate Economists Advisory Group Introduction Early in 2003, ICC's Corporate Economists Advisory Group discussed the risk of deflation in some of the world's major economies, and possible consequences for business. The fear was that historically low levels of inflation and faltering economic growth could lead to deflation - a persistent decline in the general level of prices - which in turn could trigger economic depression, with widespread company and bank failures, a collapse in world trade, mass unemployment and years of shrinking economic activity. While the risk of deflation is now remote in most countries - given the increasingly unambiguous signs of global economic recovery - its potential costs are very high and would directly affect companies. This issues paper was developed to help companies better understand the phenomenon of deflation, and to give them practical guidance on possible measures to take if and when the threat of deflation turns into reality on a future occasion. What is deflation? Deflation is defined as a sustained fall in an aggregate measure of prices (such as the consumer price index). By this definition, changes in prices in one economic sector or falling prices over short periods (e.g., one or two quarters) do not qualify as deflation. Dec lining prices can be driven by an increase in supply due to technological innovation and rapid productivity gains. These supply-induced shocks are usually not problematic and can even be accompanied by robust growth, as experienced by China. A fall in prices led by a drop in demand - due to a severe economic cycle, tight economic policies or a demand-side shock - or by persistent excess capacity can be much more harmful, and is more likely to lead to persistent deflation.
    [Show full text]
  • The End of Modern Economic Growth As We Know It Jean-Pierre Dormois
    The End of Modern Economic Growth as We Know It Jean-Pierre Dormois To cite this version: Jean-Pierre Dormois. The End of Modern Economic Growth as We Know It. 2017, pp.1-9. halshs- 02862342 HAL Id: halshs-02862342 https://halshs.archives-ouvertes.fr/halshs-02862342 Submitted on 9 Jun 2020 HAL is a multi-disciplinary open access L’archive ouverte pluridisciplinaire HAL, est archive for the deposit and dissemination of sci- destinée au dépôt et à la diffusion de documents entific research documents, whether they are pub- scientifiques de niveau recherche, publiés ou non, lished or not. The documents may come from émanant des établissements d’enseignement et de teaching and research institutions in France or recherche français ou étrangers, des laboratoires abroad, or from public or private research centers. publics ou privés. The End of Modern Economic Growth as We Know It by Jean-Pierre Dormois Economic progress is behind us in the West, warns Robert J. Gordon in a 750 pages-tome which revisits the economic history of the U.S. in the last century and a half. Measuring the impact on living standards of the major technological breakthroughs of the “second industrial revolution,” he observes that sources of productivity growth seem to have dried since the 1970s oil shock and that the productivity-enhancing effects of the digital “revolution” have so far proved elusive. Reviewed: Robert J. Gordon, The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War, Princeton, Princeton University Press, 2016. Between 1870 and 1970, or more precisely between 1890 and 1940, the author demonstrates, the U.S.
    [Show full text]
  • Cities, Information, and Economic Growth
    Cities, Information, and Economic Growth Cities, Information, and Economic Growth Edward L. Glaeser Harvard University Great are the advantages which people following the same skilled trade get from near neighborhood to one another. The mysteries of the trade become no mysteries; but are, as it were, in the air. A. Marshall Principles of Economics For centuries economists have fervently sought to understand the forces behind economic progress. Smith (1776), Marx (1909), Marshall (1890), Young (1928), and Keynes (1936) all hotly pursued this topic. In the post-World War II period, economic theorists, develop- ment economists, macroeconomists, econometricians, economic historians, and growth economists have devoted considerable energy to thinking about the forces behind long- run growth rates. It would be impossible to claim that these economists have reached a consensus on the causes of growth, but it seems clear that the growth of economies does not involve the simple accumulation of capital and labor. Theoretical models of capital accumulation (based on Solow, 1956, for example) ultimately leave the growth rate as an unexplained outside parameter. Empirically the stunning range of cross-national experiences makes it clear that the forces driving growth are rich and varied. Instead of continuing to use simple capital accumulation models, economists (following Romer, 1986) have moved toward models in which the stock of knowledge, in the Nation and the world, plays a critical role in facilitating progress. The nature of intellectual capi- tal—mostly the presence of strong external effects—solves certain technical problems when explaining why global increasing returns, which are necessary to explain growth, can coexist with competition.
    [Show full text]
  • New Keynesian Macroeconomics: Empirically Tested in the Case of Republic of Macedonia
    A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Josheski, Dushko; Lazarov, Darko Preprint New Keynesian Macroeconomics: Empirically tested in the case of Republic of Macedonia Suggested Citation: Josheski, Dushko; Lazarov, Darko (2012) : New Keynesian Macroeconomics: Empirically tested in the case of Republic of Macedonia, ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft, Kiel und Hamburg This Version is available at: http://hdl.handle.net/10419/64403 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu NEW KEYNESIAN MACROECONOMICS: EMPIRICALLY TESTED IN THE CASE OF REPUBLIC OF MACEDONIA Dushko Josheski 1 Darko Lazarov2 Abstract In this paper we test New Keynesian propositions about inflation and unemployment trade off with the New Keynesian Phillips curve and the proposition of non-neutrality of money.
    [Show full text]
  • The General Theory of Employment, Interest, and Money. Keynes, John
    Intermediate Macroeconomic Analysis ECON 302 SUMMER 2013 DREW UNIVERSITY (Preliminary Syllabus) Jamee K. Moudud [email protected] Office: TBA Office Hours: TBA Course Description This course is a study of the determinants of the level of income, employment, and prices as seen in competing theoretical frameworks. Topics include an analysis of inflation and unemployment, their causes, costs, and policy options; the sources of instability in a market economy; debates on policy activism; prospects for the control of aggregate demand. The objective of the course is to enable students to learn the fundamental theoretical debates in economics and their real-world implications. At every step we will contrast the neoclassical approach with alternative approaches, including that of Keynes who is generally considered to be the founder of modern macroeconomics. We will therefore draw on both a macroeconomics textbook and Keynes’ famous book The General Theory of Employment, Interest, and Money. Textbooks: Peterson, Wallace C. and Estenson, Paul S. (1996). Income, Employment, Economic Growth, 8th edition. W.W. Norton & Company. (PE) Keynes, John Maynard (1953). The General Theory of Employment, Interest, and Money. Harcourt Brace Jovanovich. Course Requirements: There will be two mid-terms and a final exam. Exams will consist of multiple choice and short-answer questions. There will also be occasional homework assignments. 1 Grades: % of Grade Exam #1 20% Exam #2 25% Exam #3 (Final Exam) 25% Class Participation and Daily Reaction Papers 30% Three in class exams will comprise 70% of your grade. If you know you will need to miss an exam for legitimate reasons (e.g.
    [Show full text]
  • Inflation and Economic Growth: Some Evidence for the OECD Countries1
    Inflation and economic growth: some evidence for the OECD countries1 Javier Andrés and Ignacio Hernando Introduction During the last decade, inflation control has become the main goal of monetary policies in western economies. This move in monetary policy-making is firmly rooted in the belief, shared by many economists as well as politicians, that the costs of inflation are non-negligible, whereby keeping inflation under control pays off in terms of higher per capita income in the future. The lack of theoretical models explicitly addressing the issue of the long-run effects of inflation has not prevented many researchers from trying to estimate inflation costs. The evidence so far is not conclusive. A series of recent papers have tried to assess the long-run impact of current inflation within the framework of the so called convergence equations. These equations can be derived from a theoretical model of economic growth, although the reasons for including the inflation rate among the determinants of growth remain somewhat unclear. This paper adheres to this approach to estimating the impact of inflation upon the long-run performance of the OECD countries. The approach has several advantages as compared with more standard ones. First, and foremost, an explicit model prevents the omission of relevant variables. Second, convergence equations allow for a variety of effects of inflation including those which reduce accumulation rates and those which undermine the efficiency with which productive factors operate. Finally, in this framework a clear distinction can be made between level and rate of growth effects of inflation; this difference matters as regards the size and the timing of the costs of inflation.
    [Show full text]
  • Robert J. Barro Harvard University Department of Economics Littauer Center Cambridge, MA 02138 Keynesian Models
    NEER WORKING PAPER SERIES NEW CLASSICALS AND KEYNESIANS, OR THE GOOD GUYS AND THE BAD GUYS - RobertJ.Barro WorkingPaper No. 2982 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 May, 1989 Prepared for presentation at the 125th anniversary meeting of the Swiss Economic Association, April 1989. This paper is part of NBER's research program in Economic Fluctuations. Any opinions expressed are thoseof the author not those of the National Bureau of Economic Research. NBER WorkingPaper #2982 May1989 NEWC1ASSICALS AND KEYNESIANS, OR THEGOOD GUYS AND THE BAD GUYS ABSTRACT Old-style Keynesian models relied on sticky prices or wages to explain unemployment and to argue for demand-side macroeconomic policies. This approach relied increasingly on a Phillips-curve view of the world, and therefore lost considerable prestige with the events of the 1970s. The new classical macroeconomics began at about that time, and focused initially on the apparent real effects of monetary disturbances. Despite initial successes, this analysis ultimately was unsatisfactory as an explanation for an important role of money in business fluctuations. Nevertheless, the approach achieved important methodological advances, such as rational expectations and new methods of policy evaluation. Subsequent research by new classicals has deemphasized monetary shocks, and focused instead on real business cycle models and theories of endogenous economic growth. These areas appear promising at this time. Another development is the so-called new Keynesian economics, which includes long-term contracts, menu costs, efficiency wages and insider-outsider theories, and macroeconomic models with imperfect competition. Although some of these ideas may prove helpful as elements in real business cycle models, my main conclusion is that the new Keynesian economics has not been successful in rehabilitating the Keynesian approach.
    [Show full text]
  • Deflation: Economic Significance, Current Risk, and Policy Responses
    Deflation: Economic Significance, Current Risk, and Policy Responses Craig K. Elwell Specialist in Macroeconomic Policy August 30, 2010 Congressional Research Service 7-5700 www.crs.gov R40512 CRS Report for Congress Prepared for Members and Committees of Congress Deflation: Economic Significance, Current Risk, and Policy Responses Summary Despite the severity of the recent financial crisis and recession, the U.S. economy has so far avoided falling into a deflationary spiral. Since mid-2009, the economy has been on a path of economic recovery. However, the pace of economic growth during the recovery has been relatively slow, and major economic weaknesses persist. In this economic environment, the risk of deflation remains significant and could delay sustained economic recovery. Deflation is a persistent decline in the overall level of prices. It is not unusual for prices to fall in a particular sector because of rising productivity, falling costs, or weak demand relative to the wider economy. In contrast, deflation occurs when price declines are so widespread and sustained that they cause a broad-based price index, such as the Consumer Price Index (CPI), to decline for several quarters. Such a continuous decline in the price level is more troublesome, because in a weak or contracting economy it can lead to a damaging self-reinforcing downward spiral of prices and economic activity. However, there are also examples of relatively benign deflations when economic activity expanded despite a falling price level. For instance, from 1880 through 1896, the U.S. price level fell about 30%, but this coincided with a period of strong economic growth.
    [Show full text]
  • Inflation and Growth
    M AY / JU N E 1 9 9 6 Robert J. Barro is a professor of economics at Harvard University. The initial version of this paper was written while he was Houblon-Norman research fellow at the Bank of England. This research was supported by the National Science Foundation. Inflation and Figure 1a, b Histograms for Inflation Rate Growth Number of Observations 200 Robert J. Barro 150 n recent years, many central banks have placed increased emphasis on price Istability. Monetary policy—whether 100 expressed in terms of interest rates or growth of monetary aggregates—has been increasingly geared toward the achieve- 50 ment of low and stable inflation. Central bankers and most other observers view 0 price stability as a worthy objective 0.00 0.30 0.60 0.90 1.20 1.50 because they think that inflation is costly. Inflation Rate Some of these costs involve the average Number of Observations rate of inflation, and others relate to the 12.5 variability and uncertainty of inflation. But the general idea is that businesses and 10.0 households are thought to perform poorly when inflation is high and unpredictable. The academic literature contains a lot 7.5 of theoretical work on the costs of infla- tion, as reviewed recently by Briault 5.0 (1995). This analysis provides a presump- tion that inflation is a bad idea, but the 2.5 case is not decisive without supporting empirical findings. Although some empiri- 0.0 cal results (also surveyed by Briault) sug- 0.35 0.70 1.05 1.40 1.75 gest that inflation is harmful, the evidence Inflation Rate (For Values Above 20 Percent Per Year) is not overwhelming.
    [Show full text]
  • Economic Growth and Unemployment Issue: Panel Özgür Bayram Soylu, İsmail Çakmak, Fatih Okur Data Analysis in EEC
    Soylu, Ö. B., Çakmak, I., & Okur, F. (2018). Economic growth and Journal unemployment issue: Panel data analysis in Eastern European Countries. Journal of International of International Studies, 11(1), 93-107. doi:10.14254/2071-8330.2018/11-1/7 Studies © Foundation Economic growth and unemployment of International Studies, 2018 issue: Panel data analysis in Eastern © CSR, 2018 Papers Scientific European Countries Özgür Bayram Soylu Department of Economics, Hacettepe University, Turkey [email protected] İsmail Çakmak Department of Economics, Hacettepe University, Turkey [email protected] Fatih Okur Department of Economics, Hacettepe University, Turkey [email protected] Abstract. The concepts of economic growth and unemployment are at the beginning Received: August, 2017 of the most important variables in the sense that all economies are choosing and 1st Revision: implementing economic policies. The purpose of this study to investigate the November, 2017 relation between economic growth and unemployment in Eastern European Accepted: December, 2017 Countries for the period of 1992-2014 within panel data framework. In this paper this relationship has been examined in the context of Okun’s Law. Panel DOI: Unit Root, Pooled Panel OLS and Panel Johansen Co-integration tests are 10.14254/2071- applied respectively. The results show that the economic growth and 8330.2018/11-1/7 unemployment series are stationary at first level, unemployment affected positively by economic growth, in other words 1% rise in GDP will fall the unemployment rate by 0.08% because of Okun’s coefficient for Eastern European Countries and there is a co-integration between these important macroeconomic variables.
    [Show full text]
  • The Monetarism
    Munich Personal RePEc Archive The Monetarism Juravle, Daniel Alexandru Ioan Cuza University Faculty of Economics and Business Administration 25 September 2011 Online at https://mpra.ub.uni-muenchen.de/33707/ MPRA Paper No. 33707, posted 25 Sep 2011 15:24 UTC Drd. Juravle Daniel- The Monetarism The Monetarism Abstract: The monetarism, as I have tried to outline in this work is based on the ideas of the American professor Milton Friedman, who tried to revitalize and reconfigure the old quantity theory of money. These ideas were transposed and discussed by authors like Ion Pohoață, Tiberiu Brăilean or Al. Tașnadii and Claudiu Doltu in the works that I have guided the construction of this essay. Thus we observ that one of the basic principles of Friedman’s conceptions was related on budget actions rejection. Actions which in the absence of such money, have little influence on total spending, output and prices, on the significant variables such as macroeconomic. So find a substantive argument in favor of interlocking key economic policies, which can not exist without the other and some which ensures sustainability of state institutions and the economy. Keywords: money, prices, liberalism, inflation, unemployment. JEL Classification: E4,E41, E42, E52, N1, P24 The monetarism represents the first product, the most polished and resonant of the Chicago school. [Pohoață, 1993]. Discussed, analyzed and turned on all sides, especially by economists from abroad, there possibility to believe that further investigations are no longer the point; aspect which I consider false and unheeded since the beginning of this essay. About such a theoretical system, current of thought and practice whatever write action is never quite enough.
    [Show full text]