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Evaluating German business cycle forecasts under an asymmetric loss function

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  • Jörg Döpke

    ()

  • Ulrich Fritsche

    ()

  • Boriss Siliverstovs

    ()

Abstract

Based on annual data for growth and inflation forecasts for Germany covering the 1970-2007 period and up to 17 different forecasts per year, we test for a possible asymmetry of the forecasters’ loss function and estimate the degree of asymmetry for each forecasting institution using the approach of Elliot et al. (2005). Furthermore, we test for the rationality of the forecasts under the assumption of a possibly asymmetric loss function and for the features of an optimal forecast under the assumption of a generalised loss function. We find evidence of the existence of an asymmetric loss function of German forecasters only in the case of pooled data and a quad-quad loss function. We can reject the hypothesis of rationality of the growth forecasts based on a pooled dataset, but not on data for single institutions. The rationality of inflation forecasts is frequently rejected in the case of single institutions, and also for pooled data.

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File URL: http://dx.doi.org/10.1787/jbcma-2010-5kmlj35rx10s
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Bibliographic Info

Article provided by OECD Publishing,CIRET in its journal OECD Journal: Journal of Business Cycle Measurement and Analysis.

Volume (Year): 2010 (2010)
Issue (Month): 1 ()
Pages: 1-18

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Handle: RePEc:oec:stdkab:5kmlj35rx10s

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Keywords: Business Cycle Forecast Evaluation; Asymmetric Loss Function; Rational Expectations;

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References

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  2. Peter F. Christoffersen & Francis X. Diebold, . "Optimal Prediction Under Asymmetric Loss," CARESS Working Papres, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences 97-20, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. The loss aversion of economic forecasters
    by Economic Logician in Economic Logic on 2009-12-01 13:59:00
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Cited by:
  1. Pierdzioch, Christian & Rülke, Jan-Christoph & Stadtmann, Georg, 2012. "On the loss function of the Bank of Canada: A note," Economics Letters, Elsevier, Elsevier, vol. 115(2), pages 155-159.
  2. Claudia M. Buch & Oliver Holtemöller, 2014. "Do We Need New Modelling Approaches in Macroeconomics?," IWH Discussion Papers, Halle Institute for Economic Research 8, Halle Institute for Economic Research.
  3. Krüger, Jens J. & Hoss, Julian, 2012. "German business cycle forecasts, asymmetric loss and financial variables," Economics Letters, Elsevier, Elsevier, vol. 114(3), pages 284-287.
  4. Jan-Christoph Ruelke, 2012. "Do Private Sector Forecasters Desire to Deviate From the German Council of Economic Experts?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 232(4), pages 414-428, July.
  5. Jens J. Krüger, 2014. "A multivariate evaluation of German output growth and inflation forecasts," Economics Bulletin, AccessEcon, vol. 34(3), pages 1410-1418.
  6. Pierdzioch, Christian & Rülke, Jan-Christoph & Stadtmann, Georg, 2012. "Oil price forecasting under asymmetric loss," Discussion Papers 314, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
  7. Ulrich Fritsche & Christian Pierdzioch & Jan-Christoph Ruelke & Georg Stadtmann, 2012. "Forecasting the Brazilian Real and the Mexican Peso: Asymmetric Loss, Forecast Rationality, and Forecaster Herding," Macroeconomics and Finance Series, Hamburg University, Department Wirtschaft und Politik 201202, Hamburg University, Department Wirtschaft und Politik.
  8. Hans Christian Müller-Dröge & Tara M. Sinclair & H.O. Stekler, 2014. "Evaluating Forecasts of a Vector of Variables: a German Forecasting Competition," CAMA Working Papers 2014-55, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  9. Tsuchiya, Yoichi, 2012. "Evaluating Japanese corporate executives’ forecasts under an asymmetric loss function," Economics Letters, Elsevier, Elsevier, vol. 116(3), pages 601-603.

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