Okun's law in the Nordics : A time series analysis based on Okun’s law

Sammanfattning: In this thesis we examined the validity of Okun’s law across four Nordic countries (Sweden,Norway, Finland and Denmark) using the gap version of Okun's law. Our method foranalyzing the Okun’s law for Nordic countries in this study is time series. We performed anAugmented-Dickey fuller test in order to test for stationarity, to which the result yielded allvariables stationary. Our result, after running the regression of the gap version of Okun’s law,confirms the existence of a negative relationship between unemployment rate and economicgrowth. However, the outcome indicates different Okun coefficients for the four Nordiccountries within the time period of 1989-2018. In conclusion we can affirm that according toour result, the basic assumptions made by Okun regarding a negative correlation betweenunemployment rate and output still holds true today for Nordic countries, with the exceptionthat the percentage decrease in unemployment rate when output increases by one percentvaries across Nordic countries.