Evaluating FOMC forecasts
AbstractFederal Reserve policymakers began reporting their economic forecasts to Congress in 1979. These forecasts are important because they indicate what the Federal Open Market Committee (FOMC) members think will be the likely consequence of their policies. We evaluate the accuracy of the FOMC forecasts relative to private sector forecasts, the forecasts of the Research Staff at the Board of Governors, and a naÃ¯ve alternative forecast. The Fed reports both the range (high and low) of the individual policymaker's forecasts and a truncated central tendency. We find no reason to consider the truncated version. We find that the FOMC output forecasts were better than the naÃ¯ve model and at least as good as those of the private sector and the Fed staff. The FOMC inflation forecasts were more accurate than the private sector forecasts and the naÃ¯ve model. For the period ending in 1996, however, they were not as accurate as Fed staff inflation forecasts.
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Bibliographic InfoArticle provided by Elsevier in its journal International Journal of Forecasting.
Volume (Year): 19 (2003)
Issue (Month): 4 ()
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