Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/96435
Authors: 
Barnes, Michelle L.
Gumbau-Brisa, Fabià
Olivei, Giovanni P.
Year of Publication: 
2012
Series/Report no.: 
Working Papers, Federal Reserve Bank of Boston 13-3
Abstract: 
Using U.S. real-time data, we show that changes in the unemployment rate unexplained by Okun's Law have significant predictive power for GDP data revisions. A positive (negative) error in Okun's Law in real time implies that GDP will be later revised to show less (more) growth than initially estimated by the statistical agency. The information in Okun's Law errors about the true state of real economic activity also helps to improve GDP forecasts in the near term. Our findings add a new dimension to the interpretation of real-time Okun's Law errors, as they show that these errors can convey information other than a change in potential GDP, the equilibrium unemployment rate, or the use of labor's intensive margin.
JEL: 
E01
E24
E27
E65
Document Type: 
Working Paper

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