Aggregate Accounting Earnings, Special Items and Growth in Gross Domestic Product: Evidence from Australia

56 Pages Posted: 10 Jun 2021 Last revised: 7 Sep 2021

See all articles by Lijuan Zhang

Lijuan Zhang

Australian National University

Neil L. Fargher

Australian National University (ANU)

Date Written: June 8, 2021

Abstract

Macroeconomic analysts have been found to not take full account of aggregate accounting earnings when forecasting future growth in U.S. gross domestic product (GDP). Using Australian data, we confirm this finding and find that the association between aggregate earnings and GDP growth is robust to inclusion of economic factors to capture the importance of the resources sector and the open nature of the Australian economy. We also find that this association is higher in the post-IFRS period. Finally, we document that both aggregate earnings and negative special items are important for explaining future GDP growth and forecast errors.

Keywords: Aggregate accounting earnings, GDP growth, Special items, GDP growth forecast errors

JEL Classification: E00, E01, M41

Suggested Citation

Zhang, Lijuan and Fargher, Neil L., Aggregate Accounting Earnings, Special Items and Growth in Gross Domestic Product: Evidence from Australia (June 8, 2021). Available at SSRN: https://ssrn.com/abstract=3862964 or http://dx.doi.org/10.2139/ssrn.3862964

Lijuan Zhang (Contact Author)

Australian National University ( email )

Canberra, Australian Capital Territory 2601
Australia

Neil L. Fargher

Australian National University (ANU) ( email )

Canberra, Australian Capital Territory 2601
Australia

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