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Rationality of inflation-output forecasts of MMS survey: international evidence

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  • Yasemin Ulu

Abstract

We analyse the individual rationality of inflation and output forecasts from Money Market Survey (MMS) for a group of G7 countries and EU under asymmetric univariate Linlin and Linex loss functions. We also test for joint rationality of inflation-output forecasts using the forecast rationality test under multivariate asymmetric loss functions proposed by Ulu (2013). Our results indicate that rationality is often rejected under symmetric loss, and results improve towards rationality when asymmetric loss functions are assumed. The assumption of multivariate asymmetric loss compared to univariate asymmetric loss provides further evidence towards rationality. We also analyse directional forecast accuracy of the inflation and output forecasts and find that the inflation-output forecasts of MMS are valuable when considered both jointly and separately.

Suggested Citation

  • Yasemin Ulu, 2015. "Rationality of inflation-output forecasts of MMS survey: international evidence," Applied Economics, Taylor & Francis Journals, vol. 47(12), pages 1187-1198, March.
    • Handle: RePEc:taf:applec:v:47:y:2015:i:12:p:1187-1198
    DOI: 10.1080/00036846.2014.990619
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    1. Victor Zarnowitz, 1967. "An Appraisal of Short-Term Economic Forecasts," NBER Books, National Bureau of Economic Research, Inc, number zarn67-1, July.
    2. Jacob A. Mincer & Victor Zarnowitz, 1969. "The Evaluation of Economic Forecasts," NBER Chapters, in: Economic Forecasts and Expectations: Analysis of Forecasting Behavior and Performance, pages 3-46, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Young Bin Ahn & Yoichi Tsuchiya, 2016. "Directional analysis of consumers’ forecasts of inflation in a small open economy: evidence from South Korea," Applied Economics, Taylor & Francis Journals, vol. 48(10), pages 854-864, February.

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