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Do Forecasters Believe in Okun’s Law? An Assessment of Unemployment and Output Forecasts

Author/Editor: Laurence M. Ball | João Tovar Jalles | Prakash Loungani
Authorized for Distribution: February 10, 2014
Electronic Access: Free Full Text (PDF file size is 465KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: This paper provides an assessment of the consistency of unemployment and output forecasts. We show that, consistent with Okun’s Law, forecasts of real GDP growth and the change in unemployment are negatively correlated. The Okun coefficient—the responsiveness of unemployment to growth—from forecasts is fairly similar to that in the data for various countries. Furthermore, revisions to unemployment forecasts are negatively correlated with revisions to real GDP forecasts. These results are based on forecasts taken from Consensus Economics for nine advanced countries since 1989.
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Series: Working Paper No. 14/24
Subject(s): Unemployment | Economic growth | Economic forecasting
    Published:   February 10, 2014        
    ISBN/ISSN:   9781475584097/1018-5941   Format:   Paper
    Stock No:   WPIEA2014024   Pages:   19
    Price:   US$18.00
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