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Disagreement among forecasters in G7 countries

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Author Info
Jonas Dovern () (Kiel Economics Research & Forecasting, Fraunhoferstr. 13, 24118 Kiel, Germany.)
Ulrich Fritsche () (University of Hamburg, Edmund-Siemers-Allee 1, 20146 Hamburg, Germany.)
Jiri Slacalek () (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)

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Abstract

Using the Consensus Economics dataset with individual expert forecasts from G7 countries we investigate determinants of disagreement (crosssectional dispersion of forecasts) about six key economic indicators. Disagreement about real variables (GDP, consumption, investment and unemployment) has a distinct dynamic from disagreement about nominal variables (inflation and interest rate). Disagreement about real variables intensifies strongly during recessions, including the current one (by about 40 percent in terms of the interquartile range). Disagreement about nominal variables rises with their level, has fallen after 1998 or so (by 30 percent), and is considerably lower under independent central banks (by 35 percent). Cross-sectional dispersion for both groups increases with uncertainty about the underlying actual indicators, though to a lesser extent for nominal series. Country-by-country regressions for inflation and interest rates reveal that both the level of disagreement and its sensitivity to macroeconomic variables tend to be larger in Italy, Japan and the United Kingdom, where central banks became independent only around the mid-1990s. These findings suggest that more credible monetary policy can substantially contribute to anchoring of expectations about nominal variables; its effects on disagreement about real variables are moderate. JEL Classification: E31, E32, E37, E52, C53.

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Paper provided by European Central Bank in its series Working Paper Series with number 1082.

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Length: 68 pages
Date of creation: Aug 2009
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Handle: RePEc:ecb:ecbwps:20091082

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Related research
Keywords: disagreement; survey expectations; monetary policy; forecasting.;

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