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Rationality and the Role of Judgement in Macroeconomic Forecasting

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  • Clements, Michael P

Abstract

This paper examines the effects of judgmental adjustments on the rationality of macroeconomic forecasts. Published forecasts based on large-scale models are rarely purely model-based but often include extensive adjustments. Forecasters' adjustments tend to improve forecast accuracy but there is no evidence of their impact on the rationality of forecasts. Using series of revisions to forecasts, the author finds little evidence that published forecasts are excessively smooth in the Nordhaus (1987) sense but intercept corrections do appear to reduce the variation over time in purely model-based forecasts and to alter the underlying output-inflation trade-off implicit in the model. Copyright 1995 by Royal Economic Society.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 105 (1995)
Issue (Month): 429 (March)
Pages: 410-20

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Handle: RePEc:ecj:econjl:v:105:y:1995:i:429:p:410-20

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Cited by:
  1. Dupuy Arnaud, 2009. "An evaluation of the forecast of the indicator of the labour market gap," ROA Technical Report 003, Maastricht University, Research Centre for Education and the Labour Market (ROA).
  2. Fred Joutz & Michael P. Clements & Herman O. Stekler, 2007. "An evaluation of the forecasts of the federal reserve: a pooled approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(1), pages 121-136.
  3. Franses, Ph.H.B.F. & Kranendonk, H.C. & Lanser, D., 2007. "On the optimality of expert-adjusted forecasts," Econometric Institute Research Papers EI 2007-38, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  4. David Hendry & Michael P. Clements, 2001. "Economic Forecasting: Some Lessons from Recent Research," Economics Series Working Papers 78, University of Oxford, Department of Economics.
  5. David F. Hendry & Michael P. Clements, 1994. "Can Econometrics Improve Economic Forecasting?," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 130(III), pages 267-298, September.
  6. Lawrence, Michael & O'Connor, Marcus, 2000. "Sales forecasting updates: how good are they in practice?," International Journal of Forecasting, Elsevier, vol. 16(3), pages 369-382.
  7. repec:lan:wpaper:539557 is not listed on IDEAS
  8. repec:lan:wpaper:413 is not listed on IDEAS
  9. repec:lan:wpaper:425 is not listed on IDEAS
  10. Duo Qin, 2010. "Econometric Studies of Business Cycles in the History of Econometrics," Working Papers 669, Queen Mary, University of London, School of Economics and Finance.
  11. Clements, Michael P., 2010. "Explanations of the inconsistencies in survey respondents' forecasts," European Economic Review, Elsevier, vol. 54(4), pages 536-549, May.
  12. Dupuy,Arnaud, 2005. "An evaluation of labour market forecasts by type of education and occupation for 2002," ROA Working Paper 002, Maastricht University, Research Centre for Education and the Labour Market (ROA).
  13. repec:lan:wpaper:470 is not listed on IDEAS
  14. Jakab M., Zoltán & Kovács, Mihály András & Kiss, Gergely, 2006. "Mit tanultunk?. A jegybanki előrejelzések szerepe az inflációs cél követésének első öt évében Magyarországon
    [What are we studying?. The role of central-bank forecasts in Hungarian inf
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1101-1134.
  15. Vuchelen, Jef & Gutierrez, Maria-Isabel, 2005. "A direct test of the information content of the OECD growth forecasts," International Journal of Forecasting, Elsevier, vol. 21(1), pages 103-117.

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