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

Laurence Ball, Joao Jalles and Prakash Loungani

No 2014/024, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: WP; Okun coefficient; Okun; Okun's Law; Unemployment; forecast revisions; Okun’s Law; Great Recession; forecast assessment; coefficient from the data; coefficients comparison; Law to a degree; estimates of the Okun coefficient; plots of Okun coefficient; magnitude of the Okun coefficient; real GDP forecast; estimates of the Okun's coefficient; GDP forecasting; Unemployment rate; Global financial crisis of 2008-2009; Australia and New Zealand (search for similar items in EconPapers)
Pages: 19
Date: 2014-02-10
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Citations: View citations in EconPapers (10)

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Journal Article: Do forecasters believe in Okun’s Law? An assessment of unemployment and output forecasts (2015)
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