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

ByLaurence M. Ball, João Tovar Jalles, Prakash Loungani

February 10, 2014

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.

Subject: Financial crises, GDP forecasting, Global financial crisis of 2008-2009, Labor, National accounts, Unemployment, Unemployment rate

Keywords: Australia and New Zealand, coefficient from the data, coefficients comparison, estimates of the Okun coefficient, estimates of the Okun's coefficient, forecast assessment, forecast revisions, GDP forecasting, Global financial crisis of 2008-2009, Great Recession, Law to a degree, magnitude of the Okun coefficient, Okun, Okun coefficient, Okun's Law, Okun’s Law, plots of Okun coefficient, real GDP forecast, Unemployment, Unemployment rate, WP

Pages:
19
Volume:
2014
DOI:
https://doi.org/10.5089/9781475584097.001
Issue:
024
Series:
Working Paper No. 2014/024
Stock No:
WPIEA2014024
ISBN:
9781475584097
ISSN:
1018-5941

IMF’s Work

RESOURCES

TOPICS

Flagship Publications

Other Publications

IMF reports and publications by country

Regional Offices

All News

See Also

For Journalists

Press Center

RESOURCES

FLAGSHIPS

KEY SERIES

IMF NOTES

Loading component...

IMF Working Papers