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Do the OECD 24 month horizon growth forecasts for the G7-countries contain information?

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  • Jef Vuchelen
  • Maria-Isabel Gutierrez
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    Abstract

    The OECD produces two-year-ahead growth forecasts for the G7-countries since 1987; these forecasts have never been evaluated. A regression is developed that tests for the information content of the forecasts. The idea is that this content is the added value forecasters incorporate in their forecasts. The information content is defined relative to the forecast for the previous year. In the end, the added value contained in the current year forecast is calculated relative to the last observation. The test consists in checking whether the information content reduces the forecasts error. The study begins with a calculation of the usual accuracy statistics. These indicate an extreme low quality for the forecasts. The regression tests support this conclusion although the forecasts for Japan do possess some information. Alarming for users of forecasts is that there are no obvious alternatives.

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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Economics.

    Volume (Year): 37 (2005)
    Issue (Month): 8 ()
    Pages: 855-862

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    Handle: RePEc:taf:applec:v:37:y:2005:i:8:p:855-862

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    References

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    1. Ă–ller, Lars-Erik & Barot, Bharat, 2000. "The Accuracy of European Growth and Inflation Forecasts," Working Paper 72, National Institute of Economic Research.
    2. Jozef Vuchelen & Maria Gutierrez, 2003. "Do the OECD forecasts for the belgian economy contain information?," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 46(2), pages 31-64.
    3. Ash, J. C. K. & Smyth, D. J. & Heravi, S. M., 1998. "Are OECD forecasts rational and useful?: a directional analysis," International Journal of Forecasting, Elsevier, vol. 14(3), pages 381-391, September.
    4. Holden, K & Peel, D A, 1990. "On Testing for Unbiasedness and Efficiency of Forecasts," The Manchester School of Economic & Social Studies, University of Manchester, University of Manchester, vol. 58(2), pages 120-27, June.
    5. Granger, Clive W J, 1996. "Can We Improve the Perceived Quality of Economic Forecasts?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 11(5), pages 455-73, Sept.-Oct.
    6. Fildes, Robert & Stekler, Herman, 2002. "The state of macroeconomic forecasting," Journal of Macroeconomics, Elsevier, vol. 24(4), pages 435-468, December.
    7. Kreinin, Mordechai E., 2000. "Accuracy of OECD and IMF Projection," Journal of Policy Modeling, Elsevier, vol. 22(1), pages 61-79, January.
    8. Stekler, H. O., 1991. "Macroeconomic forecast evaluation techniques," International Journal of Forecasting, Elsevier, vol. 7(3), pages 375-384, November.
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