A Cross-country Analysis of the Okun’s Law Coefficient Convergence in Europe

In this paper, we examine whether evidence is consistent with convergence of the Okun’s Law coefficient (OLC) among several alternative groupings of European economies. A two step empirical strategy is employed. The first step obtains rolling regression estimates of the OLC for individual European countries. In the second step, we examine how the crosscountry variance of the OLC evolves over the decade until 2002 in the selected country groupings. We find evidence consistent with convergence of the OLC among northern European countries, and among countries with centralised wage bargaining, but an absence of convergence in other country groups