Note to Self: Okun's Law
8/5/09 10:30 PM
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Note to Self: Okun's Law Restricting yourself to post-1995 data seems to make very little difference in Okun's Law:
http://delong.typepad.com/sdj/2009/08/note-to-self-okuns-law.html
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Note to Self: Okun's Law
http://delong.typepad.com/sdj/2009/08/note-to-self-okuns-law.html
8/5/09 10:30 PM
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Note to Self: Okun's Law
8/5/09 10:30 PM
T-statistics on the slope coefficient of 7.9 for the full sample and 3.9 for the post-1995 sample... rated 4.94 by you and 16 others [? ] You loved this post (
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Comments You can follow this conversation by subscribing to the comment feed for this post. I would have rated this post "excellent" if you'd given just a smidgen of background; or a link to same. Had to look it up. Great post though, genuinely useful data. It's always good to know gravity is still there; even if one didn't know what it was or why it was there. Ignore this if it really was just a "note to self"...on your public blog...which would be weird...just so you know. http://delong.typepad.com/sdj/2009/08/note-to-self-okuns-law.html
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Note to Self: Okun's Law
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Posted by: Shmoe | August 03, 2009 at 10:06 AM But the point here is not the t-stat on the slopes. I think everyone including Krugman thinks Okun's Law is true. The question is whether the current recession is holding to our previous understanding of Okun's Law. So, what needs to be added to the post is the standardized residual on the upper left-hand point. It's obviously going to be positive. If it's two or more, point Delong. If it's 1.5 or less, point Krugman. Inbetween I am happy to call it a draw. Posted by: Victor Matheson | August 03, 2009 at 10:12 AM Or at least instead of telling us the t-statistic, tell us the slope coefficient. (if you must provide a test-statistic, how about the F-stat on the hypothesis of subsample stability :-) ). Vertical scales are different in the two graphs but as best as I can tell the slopes are, in fact, very similar... Posted by: srb | August 03, 2009 at 10:27 AM Both scatterplots look a bit nonlinear, steeper to the left and flatter to the right. Residuals are mostly positive for growth less than 2% and mostly negative for 2-4% growth. What if you added a growth squared term, or restricted your domain to growth less than 3 or 4 percent? Posted by: Blar | August 03, 2009 at 10:49 AM It matters whether you regress Change in Unemployment on Change in Real GDP or Change in Real GDP on Change in Unemployment. The estimated slopes are not reciprocals of each other. This is often ignored by people who discuss Okun's Lae. Which direction is more appropriate for the questions you are asking? When you say, as in an earlier post, "The unexpected 1.2% extra decline in real GDP in 2009 should have been accompanied by an 0.5 or 0.6 percentage-point rise in the unemployment rate, not by the 1.5 percentage point rise in the unemployment rate we are now seeing." (http://delong.typepad.com/sdj/2009/07/fasten-your-seatbelts-for-the-jobless-recovery.html) In this case, I think you want to regress change in unemployment on change in GDP. Posted by: Frank Howland | August 03, 2009 at 12:41 PM In order to make the proper comparison, don't the graphs have to be 1995-present vs. 1948-1994? As opposed to 1948-present? It seems to me, based on the change from 1995-present (showing ~0.85:1.0 ratio of change), that a graph of 1948-1994 would come in closer to a 0.6:1.0 ratio -- i.e., the traditional ratio of Okun's law -- which would seem to indicate that the period since 1995 is, in fact, different. Posted by: New Deal democrat | August 04, 2009 at 01:33 PM
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Note to Self: Okun's Law
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