Derivation of The Growth Rate Form of Okun's Law
We start with the first form of Okun's law:
Taking annual differences on both sides, we obtain
Putting both numerators over a common denominator, we obtain
Multiplying the left hand side by, which is approximately equal to 1, we obtain
We assume that, the change in the natural rate of unemployment, is approximately equal to 0. We also assume that, the growth rate of full-employment output, is approximately equal to its average value, . So we finally obtain
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