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Forecast disagreement among FOMC members

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  • Chanont Banternghansa
  • Michael W. McCracken

Abstract

This paper presents empirical evidence on the disagreement among Federal Open Market Committee (FOMC) forecasts. In contrast to earlier studies that analyze the range of FOMC forecasts available in the Monetary Policy Report to the Congress, we analyze the forecasts made by each individual member of the FOMC from 1992 to 1998. This newly available dataset, while rich in detail, is short in duration. Even so, we are able to identify a handful of patterns in the forecasts related to i) forecast horizon; ii) whether the individual is a Federal Reserve Bank president, governor, and/or Vice Chairman; and iii) whether individual is a voting member of the FOMC. Additional comparisons are made between forecasts made by the FOMC and the Survey of Professional Forecasters.

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Bibliographic Info

Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2009-059.

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Date of creation: 2009
Date of revision:
Handle: RePEc:fip:fedlwp:2009-059

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Keywords: Federal Open Market Committee ; Monetary policy ; Economic forecasting;

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  1. Kajal Lahiri & Xuguang Sheng, 2008. "Measuring Forecast Uncertainty by Disagreement: The Missing Link," Ifo Working Paper Series Ifo Working Paper No. 60, Ifo Institute for Economic Research at the University of Munich.
  2. William T. Gavin & Geetanjali Pande, 2008. "FOMC consensus forecasts," Review, Federal Reserve Bank of St. Louis, issue May, pages 149-164.
  3. N. Gregory Mankiw & Ricardo Reis & Justin Wolfers, 2003. "Disagreement about Inflation Expectations," Harvard Institute of Economic Research Working Papers 2011, Harvard - Institute of Economic Research.
  4. Davies, Anthony & Lahiri, Kajal, 1995. "A new framework for analyzing survey forecasts using three-dimensional panel data," Journal of Econometrics, Elsevier, vol. 68(1), pages 205-227, July.
  5. Christina D. Romer & David H. Romer, 2008. "The FOMC versus the Staff: Where Can Monetary Policymakers Add Value?," American Economic Review, American Economic Association, vol. 98(2), pages 230-35, May.
  6. David Romer, 2010. "A New Data Set on Monetary Policy: The Economic Forecasts of Individual Members of the FOMC," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(5), pages 951-957, 08.
  7. Ellison, Martin & Sargent, Thomas J, 2009. "A defence of the FOMC," CEPR Discussion Papers 7510, C.E.P.R. Discussion Papers.
    • Martin Ellison & Thomas J. Sargent, 2012. "A Defense Of The Fomc," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(4), pages 1047-1065, November.
  8. William T. Gavin & Rachel J. Mandal, 2002. "Evaluating FOMC forecasts," Working Papers 2001-005, Federal Reserve Bank of St. Louis.
  9. William T. Gavin, 2003. "FOMC forecast: is all the information in the central tendency?," Review, Federal Reserve Bank of St. Louis, issue May, pages 27-46.
  10. James Bullard, 2009. "Discussion of Ellison and Sargent: what questions are staff and FOMC forecasts supposed to answer?," Speech, Federal Reserve Bank of St. Louis, issue Mar 30.
  11. Henry W. Chappell Jr. & Rob Roy McGregor, 2000. "A Long History of FOMC Voting Behavior," Southern Economic Journal, Southern Economic Association, vol. 66(4), pages 906-922, April.
  12. Struyf, Anja & Rousseeuw, Peter J., 2000. "High-dimensional computation of the deepest location," Computational Statistics & Data Analysis, Elsevier, vol. 34(4), pages 415-426, October.
  13. Lahiri, Kajal & Sheng, Xuguang, 2008. "Evolution of forecast disagreement in a Bayesian learning model," Journal of Econometrics, Elsevier, vol. 144(2), pages 325-340, June.
  14. Faust, Jon & Wright, Jonathan H., 2008. "Efficient forecast tests for conditional policy forecasts," Journal of Econometrics, Elsevier, vol. 146(2), pages 293-303, October.
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Cited by:
  1. Tillmann, Peter, 2011. "Strategic forecasting on the FOMC," European Journal of Political Economy, Elsevier, vol. 27(3), pages 547-553, September.
  2. Tillmann, Peter, 2010. "The Fed's perceived Phillips curve: Evidence from individual FOMC forecasts," Journal of Macroeconomics, Elsevier, vol. 32(4), pages 1008-1013, December.
  3. Man-Keung Tang & Xiangrong Yu, 2011. "Communication of Central Bank Thinking and Inflation Dynamics," IMF Working Papers 11/209, International Monetary Fund.
  4. Tara M. Sinclair & H.O. Stekler & Warren Carnow, 2012. "Evaluating A Vector Of The Fed’S Forecasts," Working Papers 2012-002, The George Washington University, Department of Economics, Research Program on Forecasting.
  5. Tara M. Sinclair & H.O. Stekler, 2011. "Differences in Early GDP Component Estimates Between Recession and Expansion," Working Papers 2011-05, The George Washington University, Institute for International Economic Policy.
  6. Tara M. Sinclair & H.O. Stekler, 2011. "Examining the Quality of Early GDP Component Estimates," Working Papers 2011-001, The George Washington University, Department of Economics, Research Program on Forecasting, revised Dec 2011.

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