Firms' confidence and Okun's law in OECD countries

Abstract Based on panel quarterly data regarding fifteen OECD countries for the period from 2001 to 2016, we provide empirical evidence for the relationship between firms' confidence and Okun's coefficient. In particular, we analyze if changes (updates) and persistent changes of firms' confidence have different implications for the Okun's coefficient. Based on Business Confidence Index and Managerial Sentiment Indicator we build indicators for measuring updates of the firms' confidence and performed several regressions. The findings denote that updates of medium-term as well as persistent updates of the firm's confidence are able to change the link between unemployment and output growth.