Working Paper
Forecasting U.S. Economic Activity with a Small Information Set
Abstract: We provide a parsimonious setup for forecasting U.S. GDP growth and the unemployment rate based on a few fundamental drivers. This setup yields forecasts that are reasonably accurate compared with private-sector and Federal Reserve forecasts over the 1984–2019 and post COVID-19 pandemic periods. This result is achieved by jointly estimating the processes for GDP growth and the unemployment rate, with the constraint that GDP and unemployment follow Okun’s law in first differences. This setup can be easily extended to replace the variables in the information set with factors that might better capture the underlying fundamentals.
https://doi.org/10.29412/res.wp.2025.04
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Bibliographic Information
Provider: Federal Reserve Bank of Boston
Part of Series: Working Papers
Publication Date: 2025-06-01
Number: 25-4