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Professional Forecasters: How to Understand and Exploit Them Through a DSGE Model

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  • Luis E. Rojas

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Abstract

This paper derives a link between the forecasts of professional forecasters and a DSGEmodel. I show that the forecasts of a professional forecaster can be incorporated to the statespace representation of the model by allowing the measurement error of the forecast and thestructural shocks to be correlated. The parameters capturing this correlation are reducedform parameters that allow to address two issues i) How the forecasts of the professionalforecaster can be exploited as a source of information for the estimation of the model andii) How to characterize the deviations of the professional forecaster from an ideal completeinformation forecaster in terms of the shocks and the structure of the economy.

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Bibliographic Info

Paper provided by BANCO DE LA REPÚBLICA in its series BORRADORES DE ECONOMIA with number 008945.

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Length: 16
Date of creation: 15 Aug 2011
Date of revision:
Handle: RePEc:col:000094:008945

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Keywords: Beneficio tributario al capital; exenciones a la inversión; impuestos distorsionantes.;

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  1. Andrés González Gómez & Lavan Mahadeva & Diego Rodríguez & Luis Eduardo Rojas, 2009. "Monetary Policy Forecasting In A Dsge Model With Data That Is Uncertain, Unbalanced And About The Future," BORRADORES DE ECONOMIA 005480, BANCO DE LA REPÚBLICA.
  2. Peter Ireland, 1999. "A Method for Taking Models to the Data," Computing in Economics and Finance 1999 1233, Society for Computational Economics.
  3. Koopman, Siem Jan & Harvey, Andrew, 2003. "Computing observation weights for signal extraction and filtering," Journal of Economic Dynamics and Control, Elsevier, vol. 27(7), pages 1317-1333, May.
  4. Maćkowiak, Bartosz & Wiederholt, Mirko, 2009. "Optimal sticky prices under rational inattention," Working Paper Series 1009, European Central Bank.
  5. Gonzalo Fernández-de-Córdoba & José Torres, 2011. "Forecasting the Spanish economy with an augmented VAR–DSGE model," SERIEs, Spanish Economic Association, vol. 2(3), pages 379-399, September.
  6. Jean Boivin & Marc Giannoni, 2006. "DSGE Models in a Data-Rich Environment," NBER Working Papers 12772, National Bureau of Economic Research, Inc.
  7. Marco Ottaviani & Peter Norman Sorensen, 2001. "The Strategy of Professional Forecasting," Discussion Papers 01-09, University of Copenhagen. Department of Economics.
  8. Genre, Véronique & Kenny, Geoff & Meyler, Aidan & Timmermann, Allan, 2010. "Combining the forecasts in the ECB survey of professional forecasters: can anything beat the simple average?," Working Paper Series 1277, European Central Bank.
  9. Sargent, Thomas J, 1989. "Two Models of Measurements and the Investment Accelerator," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 251-87, April.
  10. Carlos Bowles & Roberta Friz & Veronique Genre & Geoff Kenny & Aidan Meyler & Tuomas Rautanen, 2007. "The ECB survey of professional forecasters (SPF) – A review after eight years’ experience," Occasional Paper Series 59, European Central Bank.
  11. Andrade, Philippe & Le Bihan, Hervé, 2013. "Inattentive professional forecasters," Journal of Monetary Economics, Elsevier, vol. 60(8), pages 967-982.
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