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

Daniel W. Collins; Nhat Q. Nguyen

doi:10.1016/j.jaccpubpol.2021.106901

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

Journal article

Peer reviewed

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

Daniel W. Collins and Nhat Q. Nguyen

Journal of accounting and public policy, Vol.41(1), pp.1-13

01/01/2022

DOI: 10.1016/j.jaccpubpol.2021.106901

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Abstract

The role of accounting information for public policy making has received increased attention in recent years. Konchitchki and Patatoukas (2014a,b) 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. Published by Elsevier Inc.

Business & Economics

Business, Finance

Public Administration

Social Sciences

Details

Title: Subtitle: Aggregate accounting research and development expenditures and the prediction of real gross domestic product
Creators: Daniel W. Collins - University of Iowa
Nhat Q. Nguyen - Colorado State University
Resource Type: Journal article
Publication Details: Journal of accounting and public policy, Vol.41(1), pp.1-13
DOI: 10.1016/j.jaccpubpol.2021.106901
ISSN: 0278-4254
eISSN: 1873-2070
Publisher: Elsevier
Number of pages: 13
Grant note: Tippie College of Business at the University of Iowa College of Business at Colorado State University
Language: English
Date published: 01/01/2022
Academic Unit: Accounting
Record Identifier: 9984962548902771

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