The role of accounting information in forecasting Gross domestic product

Document Type : Original Article

Authors
naser riyahi nasab 1
. .. 2
alireza moradi 3
Mehrdad Ghanbari 4
1 Ph.D Candidate, Department of Accounting, Kermanshah Branch, Islamic Azad University, Kermanshah, Iran.
2 Assistant Professor, Department of Accounting, Kermanshah Branch, Islamic Azad University, Kermanshah, Iran.
3 Assistant Professor, Department of Economics, Kermanshah Branch, Islamic Azad University, Kermanshah, Iran.
4 Assistant Professor, Department of Accounting, Kermanshah Branch, Islamic Azad University, Kermanshah, Iran
Abstract
Gross domestic product (GDP) is one of the key indicators of macroeconomics. Predicting this index is very important in the economic planning of the country, because this variable reflects the general state of a country's economy. So far, many models have been proposed to predict this variable, but models that use accounting information have not been considered. The purpose of this paper is to examine the relationship between GDP and total corporate profits, as one of the known variables in accounting. For this purpose, the quarterly time series data of macro level companies of Tehran Stock Exchange and macroeconomics in the period 2009 to 2018 are analyzed in two stages. In the first step, the relationship between these two variables is determined by specifying a linear regression model that will be estimated using the least squares method. To evaluate the predictive power of this model, the root mean square error (RMSE) criterion is estimated in two scenarios with total corporate profit and no corporate total profit. Second, the GDP response to the shock to firms' profits is estimated through a vector auto regression (VAR) model, and the contribution of this variable to GDP fluctuation is measured. The results show that the profit of all companies improves GDP forecast in the leading horizons. Also, the shock to the profits of all companies, as much as a standard deviation, explains about 28% of GDP fluctuations.
Keywords
Gross domestic product (GDP)
total corporate profit
VAR model
forecast error
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