Is there a Core of Macroeconomics that Euro Area Forecasters Believe In?

Christian Pierdzioch, Stadtmann Georg and Rülke Jan-Christoph
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Stadtmann Georg: European University Viadrina,Frankfurt, Germany
Rülke Jan-Christoph: WHU – Otto Beisheim School of Management,Vallendar, Germany

German Economic Review, 2012, vol. 13, issue 1, 103-115

Abstract: The quantity theory of money, Okun’s law, and the Phillips curve are cornerstones of macroeconomic theory. But are they also of practical relevance? Using survey data for the euro area, we found that professional economists’ forecasts are consistent with a version of the quantity theory in which forecasts of the growth rate of money supply correlate in a proportional way with forecasts of the inflation rate. We also found that forecasts of changes in the unemployment rate and forecasts of the growth rate of real output are consistent with Okun’s law. Evidence of a systematic link between forecasts of the inflation rate and forecasts of the unemployment rate, however, is not strong.

Keywords: Quantity equation; Okun’s law; Phillips curve; forecasting; paneldata model (search for similar items in EconPapers)
Date: 2012
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DOI: 10.1111/j.1468-0475.2011.00548.x

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