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Macroeconomic forecasts and microeconomic forecasters in the Survey of Professional Forecasters

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  • Tom Stark
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    Abstract

    Do professional forecasters distort their reported forecasts in a way that compromises accuracy? New research in the theory of forecasting suggests such a possibility. In a recent paper, Owen Lamont finds that forecasters in the Business Week survey make more radical forecasts as they gain experience. In this paper, the authors uses forecasts from the Federal Reserve Bank of Philadelphia's Survey of Professional Forecasters to test the robustness of Lamont's results. The author's results contradict Lamont's. However, careful examination of a methodological difference in the two surveys suggests a more general theory of forecasting that accounts for both sets of results.

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    File URL: http://www.philadelphiafed.org/research-and-data/publications/working-papers/1997/wp97-10.pdf
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    Bibliographic Info

    Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 97-10.

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    Date of creation: 1997
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    Handle: RePEc:fip:fedpwp:97-10

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    Keywords: Forecasting;

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    1. Stephen K. McNees, 1989. "Why do forecasts differ?," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 42-54.
    2. Owen Lamont, 1995. "Macroeconomics Forecasts and Microeconomic Forecasters," NBER Working Papers 5284, National Bureau of Economic Research, Inc.
    3. Zarnowitz, Victor & Lambros, Louis A, 1987. "Consensus and Uncertainty in Economic Prediction," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 591-621, June.
    4. Bonham, Carl & Cohen, Richard, 1995. "Testing the Rationality of Price Forecasts: Comment," American Economic Review, American Economic Association, vol. 85(1), pages 284-89, March.
    5. Ito, Takatoshi, 1990. "Foreign Exchange Rate Expectations: Micro Survey Data," American Economic Review, American Economic Association, vol. 80(3), pages 434-49, June.
    6. Dean Croushore, 1996. "Inflation forecasts: how good are they?," Business Review, Federal Reserve Bank of Philadelphia, issue May, pages 15-25.
    7. Keane, Michael P & Runkle, David E, 1990. "Testing the Rationality of Price Forecasts: New Evidence from Panel Data," American Economic Review, American Economic Association, vol. 80(4), pages 714-35, September.
    8. Ehrbeck, Tilman & Waldmann, Robert, 1996. "Why Are Professional Forecasters Biased? Agency versus Behavioral Explanations," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 21-40, February.
    9. David Laster & Paul Bennett & In Sun Geoum, 1997. "Rational bias in macroeconomic forecasts," Staff Reports 21, Federal Reserve Bank of New York.
    10. Victor Zarnowitz & Louis A. Lambros, 1983. "Consensus and Uncertainty in Economic Prediction," NBER Working Papers 1171, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Marco Ottaviani & Peter Norman Sorensen, 2001. "The Strategy of Professional Forecasting," Discussion Papers 01-09, University of Copenhagen. Department of Economics.
    2. Batchelor, Roy, 2007. "Bias in macroeconomic forecasts," International Journal of Forecasting, Elsevier, vol. 23(2), pages 189-203.
    3. Scott Schuh, 2001. "An evaluation of recent macroeconomic forecast errors," New England Economic Review, Federal Reserve Bank of Boston, pages 35-56.
    4. Roy Batchelor, 2007. "Forecaster Behaviour and Bias in Macroeconomic Forecasts," Ifo Working Paper Series Ifo Working Paper No. 39, Ifo Institute for Economic Research at the University of Munich.

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