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.
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Provider: Federal Reserve Bank of Kansas City
Part of Series: Economic Bulletin
Publication Date: 2021-06-02
Issue: June 2, 2021