Recent Analysis and Research

Interpreting Deviations from Okun’s Law

Posted April 21, 2014
Mary C. Daly, John Fernald, Òscar Jordà, and Fernanda Nechio

Economic Letter a Publication of Economic Research

The traditional relationship between unemployment and output growth known as Okun’s law appeared to break down during the Great Recession. This raised the question of whether this rule of thumb was still meaningful as a forecasting tool. However, recent revisions to GDP data show that its relation with unemployment followed a fairly typical cyclical pattern compared with past deep recessions and slow recoveries. The comparatively common patterns suggest that rumors of the death of Okun’s law during the Great Recession were greatly exaggerated.

View past FRBSF Economic Letters

The Euro and the Geography of International Debt Flows

Posted April 8, 2013
Galina Hale and Maurice Obstfeld

Working Papers a Publication of Economic Research

Greater financial integration between core and peripheral EMU members affected both sets of countries. Lower interest rates allowed peripheral countries to run bigger deficits. Core countries took on extra foreign leverage to expose themselves to the peripherals. The result has been asset-price bubbles and collapses in some peripheral countries, area-wide banking crisis, and sovereign debt problems. We analyze international debt flows and provide evidence that after the euro’s introduction, core countries increased borrowing from outside of the EMU and their lending to the periphery.

View past Working Papers