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Evaluation of the Quality and Success Rate of Forecasts: A Historic Overview

In: Evaluation of the Fulfilment of the CNB's Inflation Targets 1998-2007

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Author Info

  • Zuzana Antonicova
  • Karel Musil
  • Lubos Ruzicka
  • Jan Vlcek

Abstract

The paper is aimed at the evaluation of quality and the success-rate of the past Czech National Bank’s forecasts created from 2004 until mid-2006. It strives to identify the factors which have caused deviations from reality in the past forecasts and could contribute to non-fulfilment of the announced inflation target. There are three groups of factors, which have most often contributed to the overvaluation of the historical forecasts: ex post incorrect setting up of the equilibrium trajectories, non-fulfilment of some exogenous presumptions together with an influence of unexpected shocks, and inaccurate capture of some behavioural relationships within the model apparatus. According to a comparison of historical and adjusted forecasts against reality, forecasts produced during the reviewed period of time are diverted on average towards higher inflation, lower real growth, and more depreciated nominal exchange rate. Consistently, the implied trajectory of the interest rate is higher than reality. Nevertheless, the deviations of the basic macro-economic variables gradually decrease with the course of time.

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Bibliographic Info

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This chapter was published in:

  • Juraj Antal & Zuzana Antonicova & Jan Babecky & Michal Hlavacek & Tomas Holub & Roman Horvath & Jarek Hurnik & Ondra Kamenik & Karel Musil & Jiri Podpiera & Lubos Ruzicka & Michal Skorepa & Katerina S, 2008. "Evaluation of the Fulfilment of the CNB's Inflation Targets 1998-2007," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, number 01 edited by Katerina Smidkova, August.
    This item is provided by Czech National Bank, Research Department in its series Occasional Publications - Chapters in Edited Volumes with number 07.

    Handle: RePEc:cnb:ocpubc:07

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    Related research

    Keywords: Monetary policy; inflation target fulfilment; macroeconomic forecast; forecast deviation; Czech National Bank;

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    Cited by:
    1. Tomas Holub, 2008. "Causes of Deviations of Inflation from CNB Targets: An Empirical Analysis," Occasional Publications - Chapters in Edited Volumes, in: Katerina Smidkova (ed.), Evaluation of the Fulfilment of the CNB's Inflation Targets 1998-2007, chapter 4, pages 47-56 Czech National Bank, Research Department.
    2. Juraj Antal & Michal Hlaváèek & Roman Horváth, 2008. "Do Central Bank Forecast Errors Contribute to the Missing of Inflation Targets? The Case of the Czech Republic," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 58(09-10), pages 434-453, December.

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