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The track record of the Commission's forecasts - an update

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Author Info

  • A. Melander
  • G. Sismanidis
  • D. Grenouilleau
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    Abstract

    This paper has updated the assessment of the Commission's forecasts' track record from 1999 by extending the observation period from 1969-1997 to also take into account the forecasts and outcome for the years 1998-2005. This update has also included some further tests on e.g. informational efficiency and undertaken a comparison with the forecasts of other international institutions and those of market participants. The tests were carried out on the forecasts for real GDP growth, total investment, inflation, the unemployment rate, the general government balance and the current account to GDP ratio. Data have been processed in a broadly similar manner compared to the study of 1999 to ensure comparability to the greatest degree possible. Overall, the Commission's forecasts continue to dispose a reasonable track record. For instance, the forecast error for the GDP forecast, as measured by the mean absolute error, has improved by 0.03 percentage point (pp.) to 0.5 pp. for the current-year outlook and by 0.08 pp. to 0.86 pp. for the year ahead. This implies that the Commission's forecasts for GDP growth has, on average, proven to be 0.5 pp. too high / low for the current year. Forecasts for the EU generally seem to be unbiased, efficient and display a high success rate for directional accuracy. The same holds true for the outlook for most Member States, although there are individual examples to the contrary. Moreover, in view of the importance of the international environment in explaining past forecast errors, it is reassuring to note that the forecasts for the largest non-EU countries generally seem to perform well. Finally, the Commission's forecasts' track record for GDP is broadly comparable with the ones of Consensus, the IMF and the OECD.

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    File URL: http://ec.europa.eu/economy_finance/publications/publication9291_en.pdf
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    Bibliographic Info

    Paper provided by Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 291.

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    Length: 112 pages
    Date of creation: Oct 2007
    Date of revision:
    Handle: RePEc:euf:ecopap:0291

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    Related research

    Keywords: forecasts; projections; economic outlook; GDP; growth; Melander; Sismanidis; Grenouilleau;

    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Russell Davidson & James MacKinnon, 2000. "Bootstrap tests: how many bootstraps?," Econometric Reviews, Taylor & Francis Journals, vol. 19(1), pages 55-68.
    2. Goncalves, Silvia & Kilian, Lutz, 2004. "Bootstrapping autoregressions with conditional heteroskedasticity of unknown form," Journal of Econometrics, Elsevier, vol. 123(1), pages 89-120, November.
    3. Allan Timmermann, 2006. "An Evaluation of the World Economic Outlook Forecasts," IMF Working Papers 06/59, International Monetary Fund.
    4. James G. MacKinnon, 2002. "Bootstrap inference in econometrics," Canadian Journal of Economics, Canadian Economics Association, vol. 35(4), pages 615-645, November.
    5. Hansen,B.E., 1998. "The grid bootstrap and the autoregressive model," Working papers 26, Wisconsin Madison - Social Systems.
    6. Nicholas M. Kiefer & Timothy J. Vogelsang & Helle Bunzel, 2000. "Simple Robust Testing of Regression Hypotheses," Econometrica, Econometric Society, vol. 68(3), pages 695-714, May.
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    Cited by:
    1. Leal, Teresa & Pérez, Javier J. & Tujula, Mika & Vidal, Jean-Pierre, 2007. "Fiscal forecasting: lessons from the literature and challenges," Working Paper Series 0843, European Central Bank.
    2. Ildeberta Abreu, 2011. "International organisations’ vs. private analysts’ forecasts: an evaluation," Working Papers w201120, Banco de Portugal, Economics and Research Department.
    3. Merola, Rossana & Pérez, Javier J., 2013. "Fiscal forecast errors: Governments versus independent agencies?," European Journal of Political Economy, Elsevier, vol. 32(C), pages 285-299.
    4. Carlos Fonseca Marinheiro, 2010. "Fiscal sustainability and the accuracy of macroeconomic forecasts: do supranational forecasts rather than government forecasts make a difference?," GEMF Working Papers 2010-07, GEMF - Faculdade de Economia, Universidade de Coimbra.

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