Okun's Law Calculator

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Choose which side of Okun's Law to solve. 'Output gap' finds how much GDP deviates from potential; 'Unemployment gap' finds how far unemployment sits above its natural rate.
Empirical Okun coefficients vary significantly across countries. Choose a preset based on Ball, Leigh & Loungani (2012) or enter a custom value.
The current observed unemployment rate, as a percentage.
%
The non-accelerating inflation rate of unemployment (NAIRU), or structural unemployment rate. In the US this is typically estimated at 4-4.5%.
%
Output gap (Y - Y*)Negative output gap
-3.33%

How far actual GDP lies from potential GDP, as a percentage of potential. Negative = recession gap, positive = inflationary gap.

Unemployment gap (U - U*)1.5pp
Okun coefficient (beta)-0.45
GDP lost to unemployment gap3.33%
Unemployment gap (pp)1.5
Output gap (%)-3.33

The output gap is 3.33%, meaning the economy is operating below its potential GDP.

  • Unemployment is 1.50 percentage points above the natural rate (4%), creating a recessionary gap.
  • According to Okun's Law with coefficient -0.450, every 1 pp rise in the unemployment gap corresponds to a 2.22% fall in output relative to potential.
  • A negative output gap typically signals room for monetary or fiscal stimulus without stoking inflation.
  • Okun's Law is an empirical rule of thumb. Structural changes, productivity shifts, and labour-force participation swings can all cause short-run deviations.

Next stepCompare this output gap estimate with your central bank's official estimate or an IMF/OECD forecast to cross-check the result.

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