To Improve the Accuracy of GDP Growth Forecasts, Add Financial Market Conditions

Cook, Thomas R.; Doh, Taeyoung

Journal Article

To Improve the Accuracy of GDP Growth Forecasts, Add Financial Market Conditions

Abstract: More timely data on current macroeconomic conditions can reduce uncertainty about forecasts, helping policymakers mitigate the risk of extreme economic outcomes. We find that incorporating financial market conditions along with current macroeconomic conditions improves the forecast accuracy of future GDP growth. Forecasts based only on current macroeconomic conditions eventually converge to those incorporating financial market conditions, lending further support to this approach.

Keywords: GDP; Forecasts; Financial markets;

JEL Classification: D53; E44; E47;