Predicting Restatements in Macroeconomic Indicators using Accounting Information

• In Event: Macroeconomics, Politics, and Accounting

Abstract

Earnings growth dispersion contains information about trends in labor reallocation,
unemployment, and, ultimately, aggregate output. We find that initial macroeconomic
estimates released by government statistical agencies do not fully incorporate this
information. As a consequence, aggregate earnings growth dispersion predicts future
restatements in nominal and real GDP growth (and unemployment). Out-of-sample tests
suggest that early GDP growth estimates can be significantly improved by incorporating
earnings growth dispersion information. Such improvements are important for many
economic decisions that rely on the timely and accurate macroeconomic estimates,
including monetary policy, bank regulation, and economic forecasting.

Authors

• Suresh Nallareddy, Columbia University

• Maria Ogneva, University of Southern California