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Okun's Law Revisited: Should We Worry about Low Unemployment?


The quotation above expresses a common, if not dominant, view of the genesis of inflationary pressure in an economy. The story goes something like this: High GDP growth eventually places excessive strain on a nation's resources. This strain can become particularly acute in labor markets, where it is manifested as low unemployment. The labor market tightness associated with this low unemployment ultimately leads to higher prices.

The quotation above expresses a common, if not dominant, view of the genesis of inflationary pressure in an economy. The story goes something like this: High GDP growth eventually places excessive strain on a nation's resources. This strain can become particularly acute in labor markets, where it is manifested as low unemployment. The labor market tightness associated with this low unemployment ultimately leads to higher prices.


Suggested citation: Altig, David, Terry Fitzgerald, and Peter Rupert, 1997. "Okun's Law Revisited: Should We Worry about Low Unemployment?" Federal Reserve Bank of Cleveland, Economic Commentary, 05.15.1997.

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