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Evaluating Individual and Mean Non-Replicable Forecasts

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Author Info

  • Chang, Chia Lin

    ()
    (Department of Applied Economics, National Chung Hsing University, 250 Kuo Kuang Road, Taichung 402, Taiwan)

  • Franses, Philip Hans

    (Econometric Institute, Erasmus School of Economics, Erasmus University Rotterdam, The Netherlands.)

  • Mcaleer, Michael

    (Econometric Institute, Erasmus School of Economics, Erasmus University Rotterdam, and Tinbergen Institute, The Netherlands, and Department of Quantitative Economics, Complutense University of Madrid and Institute of Economic Research, Kyoto University.)

Abstract

Macroeconomic forecasts are often based on the interaction between econometric models and experts. A forecast that is based only on an econometric model is replicable and may be unbiased, whereas a forecast that is not based only on an econometric model, but also incorporates expert intuition, is non-replicable and is typically biased. In this paper we propose a methodology to analyze the qualities of individual and alternative means of non-replicable forecasts. One part of the methodology seeks to retrieve a replicable component from the non-replicable forecasts, and compares this component against the actual data. A second part modifies the estimation routine due to the assumption that the difference between a replicable and a non-replicable forecast involves measurement error. An empirical example to forecast economic fundamentals for Taiwan shows the relevance of the methodological approach using both individuals and alternative mean forecasts.

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Bibliographic Info

Article provided by Institute for Economic Forecasting in its journal Romanian Journal for Economic Forecasting.

Volume (Year): (2012)
Issue (Month): 3 (September)
Pages: 22-43

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Handle: RePEc:rjr:romjef:v::y:2012:i:3:p:22-43

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Related research

Keywords: Individual forecasts; alternative mean forecasts; efficient estimation; generated regressors; replicable forecasts; non-replicable forecasts; expert intuition;

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  1. Franses, Ph.H.B.F. & McAleer, M.J. & Legerstee, R., 2008. "Expert opinion versus expertise in forecasting," Econometric Institute Research Papers EI 2008-30, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  2. Franses, Philip Hans & Kranendonk, Henk C. & Lanser, Debby, 2011. "One model and various experts: Evaluating Dutch macroeconomic forecasts," International Journal of Forecasting, Elsevier, vol. 27(2), pages 482-495.
  3. Chia-Lin Chang & Philip Hans Franses & Michael McAleer, 2009. "How Accurate are Government Forecasts of Economic Fundamentals? The Case of Taiwan," CIRJE F-Series CIRJE-F-637, CIRJE, Faculty of Economics, University of Tokyo.
  4. Fildes, Robert & Goodwin, Paul & Lawrence, Michael & Nikolopoulos, Konstantinos, 2009. "Effective forecasting and judgmental adjustments: an empirical evaluation and strategies for improvement in supply-chain planning," International Journal of Forecasting, Elsevier, vol. 25(1), pages 3-23.
  5. Philip Hans Franses & Rianne Legerstee, 2010. "Do experts' adjustments on model-based SKU-level forecasts improve forecast quality?," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 29(3), pages 331-340.
  6. Eroglu, Cuneyt & Croxton, Keely L., 2010. "Biases in judgmental adjustments of statistical forecasts: The role of individual differences," International Journal of Forecasting, Elsevier, vol. 26(1), pages 116-133, January.
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