<p>Well you can essentially forecast anything using a VAR/VECM framework.</p>

<p>If you're wondering if such estimates will be accurate the answer really depends on the region, as the Okun Coefficent differs depending on where you are. (much like the <a href="https://en.wikipedia.org/wiki/Gravity_of_Earth#Variation_in_gravity_and_apparent_gravity" rel="nofollow noreferrer">law of gravity on earth</a>).</p>

<p>a working paper released by the IMF titled <a href="http://www.sciencedirect.com/science/article/pii/S0169207014000466" rel="nofollow noreferrer"><em>Do Forecasters Beleive in Okun's Law?</em></a> its conclusions were rather in favor for the use of Okun's law in forcasting.</p>

<blockquote>
  <p>Our results show that professional forecasters believe in Okun’s Law to a degree merited by how
  well it holds in the data. <strong>For all nine countries we study, the relationship between forecasts of
  changes in unemployment and changes in real GDP growth is negative, which is consistent with
  Okun’s Law.</strong>...</p>
</blockquote>

<p>Its generally more accurate for short run forecasts then it is for long run. However the same counter-cyclical relationship is maintained between Real GDP growth rate and Unemployment Rate.</p>

<blockquote>
  <p><strong>the correlation between output and unemployment forecast revisions is stronger in year-ahead
  forecasts than in current-year forecasts; this finding leads us to conjecture that forecasters’
  reliance on Okun’s Law is stronger in the early stages of the forecast horizon, when information
  about the likely departures from Okun’s Law is scarce.</strong> </p>
</blockquote>

CC BY-SA 3.0
2017-12-21T21:31:52.350Z
2017-12-21T21:31:52.350Z
EconJohn
<p>Can one forecast $\Delta Unemployment$ and $\Delta Inflation$ using a VAR model based on Okun's law?</p>

CC BY-SA 3.0
2017-12-21T13:18:24.857Z
I'm currently working on that, but my main goal is structural analysis. I want to go further in predicting the path dependence of unemployment and I've been reading about Arma process mixed with neural networks that shows a good grade of accuracy. I hope this help in some way
Diego Garcia Rieckhof
CC BY-SA 3.0
2017-12-21T16:20:44.460Z
Is there a reason you think you couldn't?  I popped "okun var" into Google scholar and there were all sorts of published results.
Jeff
<inflation><unemployment>
Can Okun's Law be used for forecasting?
Cardinal
# Can Okun's Law be used for forecasting?

(Asked by: username_0 on 2017-12-21)

Can one forecast $\Delta Unemployment$ and $\Delta Inflation$ using a VAR model based on Okun's law?

**Tags:** inflation, unemployment

> **Comments:**
> **username_1**: I'm currently working on that, but my main goal is structural analysis. I want to go further in predicting the path dependence of unemployment and I've been reading about Arma process mixed with neural networks that shows a good grade of accuracy. I hope this help in some way  
> **username_2**: Is there a reason you think you couldn't?  I popped "okun var" into Google scholar and there were all sorts of published results.  

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## 1 answers

### Answer by username_3 on 2017-12-21. Score: 2 | Accepted answer

Well you can essentially forecast anything using a VAR/VECM framework.

If you're wondering if such estimates will be accurate the answer really depends on the region, as the Okun Coefficent differs depending on where you are. (much like the [law of gravity on earth](https://en.wikipedia.org/wiki/Gravity_of_Earth#Variation_in_gravity_and_apparent_gravity)).

a working paper released by the IMF titled [*Do Forecasters Beleive in Okun's Law?*](http://www.sciencedirect.com/science/article/pii/S0169207014000466) its conclusions were rather in favor for the use of Okun's law in forcasting.

> Our results show that professional forecasters believe in Okun’s Law to a degree merited by how
> well it holds in the data. **For all nine countries we study, the relationship between forecasts of
> changes in unemployment and changes in real GDP growth is negative, which is consistent with
> Okun’s Law.**...

Its generally more accurate for short run forecasts then it is for long run. However the same counter-cyclical relationship is maintained between Real GDP growth rate and Unemployment Rate.

> **the correlation between output and unemployment forecast revisions is stronger in year-ahead
> forecasts than in current-year forecasts; this finding leads us to conjecture that forecasters’
> reliance on Okun’s Law is stronger in the early stages of the forecast horizon, when information
> about the likely departures from Okun’s Law is scarce.**


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