Accounting earnings and gross domestic product

We document that aggregate accounting earnings growth is an incrementally significant leading indicator of growth in nominal Gross Domestic Product (GDP). Professional macro forecasters, however, do not fully incorporate the predictive content embedded in publicly available accounting earnings data. As a result, future nominal GDP growth forecast errors are predictable based on accounting earnings data that are available to professional macro forecasters in real time.     

Negative accounting earnings and gross domestic product

Review of Accounting Studies - Konchitchki and Patatoukas Journal of Accounting and Economics 57 (1-2), 76–88, (2014a) show that aggregate accounting earnings growth predicts future nominal...     

Aggregate accounting research and development expenditures and the prediction of real gross domestic product

The role of accounting information for public policy making has received increased attention in recent years. Konchitchki and Patatoukas, 2014a, Konchitchki and Patatoukas, 2014b demonstrate that growth in aggregate accounting earnings can predict future growth in nominal and real Gross Domestic Product (GDP). We extend the micro to macro literature by decomposing earnings into the R&D and pre-R&D components. Using the Almon (1965) finite distributed lag model, we find that both components can predict future real GDP growth with different lead-lag structures. Importantly, this decomposition significantly increases the explanatory power of the predictive model using accounting information. Aggregate accounting R&D can predict real GDP through the personal consumption, business investment, and net export channels of GDP. Our study extends prior research on the forecasting usefulness of accounting information at the aggregate level and has practical implications for macro forecasting and for public policy making regarding innovative activities of publicly listed firms.     

Tilting the evidence: the role of firm-level earnings attributes in the relation between aggregated earnings and gross domestic product

Review of Accounting Studies - We examine whether the contribution of firm-level accounting earnings to the informativeness of the aggregate is tilted towards earnings with specific financial...     

Federal capital expenditures and budget deficits: Gross national product and labor implications

The issue of separating capital from operating expenditures has been largely ignored in discussions of the U.S. Federal Government's deficit. This paper attempts to overcome this void by conducting a simulation experiment designed to assess the macroeconomic consequences of separating capital from current expenditures under several alternative balanced budget rules and financing arrangements. The alternatives considered are directly related to management accounting issues and thus the purpose of this paper can be seen as compatible with the literature on the relationship between accounting techniques and economic analyses. The results of the study reaffirm the need for federal capital investment planning.     

NASDAQ Reaches Record High

NASDA Q announced March market performance statistics, total matched volume in all U.S. equity securities reached a record high 36 billion shares.