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It establishes the relationship between total output of countrys GDP to relative changes
in the unemployment rate or Arthur Okun (1962) stated that there is a negative
relationship between aggregate output and unemployment rate, which was popularly
known as Okuns law.
ut = + log Y t + t
ut =Changeemployment rate at period t .
= Intercept.
= Okun Co-efficient.
Y t =Growth rate of output.
t =Error term .
Adjusted Okuns law in case of more than one country
N
ui ,t = +
i=2