IMF Working Papers

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

By Laurence M. Ball, João Tovar Jalles, Prakash Loungani

February 10, 2014

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Laurence M. Ball, João Tovar Jalles, and Prakash Loungani. Do Forecasters Believe in Okun’s Law? An Assessment of Unemployment and Output Forecasts, (USA: International Monetary Fund, 2014) accessed November 12, 2024
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

Publication Details

  • Pages:

    19

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

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  • Series:

    Working Paper No. 2014/024

  • Stock No:

    WPIEA2014024

  • ISBN:

    9781475584097

  • ISSN:

    1018-5941