Economic Growth and Unemployment Rate of the Transition Country – the Case of the Czech Republic 1996-2009

The main aim of this paper is to compare estimations and results for Okun’s law relation coefficients of the Czech economy 1996-2009 with coefficients for economies of the US and France. These countries were chosen to compare the most discussed US economy with the France as a representative of the western-European type of economy and the Czech Republic as a representative economy of a transition country. The analysis is based on two principles – the difference version and the dynamic version of the Okun’s law. Estimations of difference version of Okun’s law coefficients show the persistence of the basic rule – the GDP growth causes the unemployment rate decrease. The estimation results express that the 1 percentage point decrease in the unemployment rate is bound with 10.1% increase of the real GDP. These numbers are different for France and the USA; the 1 percentage point decrease in the unemployment rate is bound with 2.7% increase of the real GDP in France and with 1.8% increase of the real GDP in the USA for the same time period. The output growth rate under a condition of the stable unemployment rate for the case of the Czech Republic is 2.4 %, while in France and in the USA is much smaller. The time changes in coefficients reveal the decreasing trend of the Czech GDP growth rate under a condition of the stable unemployment rate. The ratio of the GDP-change to the unemployment rate change has increased during the studied period. Estimations of dynamic version of Okun’s law have shown the same tendencies in the Czech Republic as in other two countries.