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Are 'unbiased' forecasts really unbiased? Another look at the Fed forecasts

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Author Info

  • Tara M. Sinclair

    ()
    (Department of Economics The George Washington University)

  • Fred Joutz

    ()
    (Department of Economics The George Washington University)

  • Herman O. Stekler

    ()
    (Department of Economics The George Washington University)

Abstract

This paper reconciles contradictory findings obtained from forecast evaluations: the existence of systematic errors and the failure to reject rationality in the presence of such errors. Systematic errors in one economic state may offset the opposite types of errors in the other state such that the null of rationality is not rejected. A modified test applied to the Fed forecasts shows that the forecasts were ex post biased.

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File URL: http://www.gwu.edu/~forcpgm/2008-010.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by The George Washington University, Department of Economics, Research Program on Forecasting in its series Working Papers with number 2008-010.

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Length: 18 pages
Date of creation: Aug 2008
Date of revision:
Handle: RePEc:gwc:wpaper:2008-010

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Keywords: Greenbook Forecasts; forecast evaluation; systematic errors;

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  1. David H. Romer & Christina D. Romer, 2000. "Federal Reserve Information and the Behavior of Interest Rates," American Economic Review, American Economic Association, vol. 90(3), pages 429-457, June.
  2. Jansen, Dennis W. & Kishan, Ruby P., 1999. "An Evaluation of Federal Reserve Forecasting: Reply," Journal of Macroeconomics, Elsevier, vol. 21(1), pages 189-203, January.
  3. Victor Zarnowitz & Phillip Braun, 1993. "Twenty-two Years of the NBER-ASA Quarterly Economic Outlook Surveys: Aspects and Comparisons of Forecasting Performance," NBER Chapters, in: Business Cycles, Indicators and Forecasting, pages 11-94 National Bureau of Economic Research, Inc.
  4. Fildes, Robert & Stekler, Herman, 2002. "Reply to the comments on 'The state of macroeconomic forecasting'," Journal of Macroeconomics, Elsevier, vol. 24(4), pages 503-505, December.
  5. Holden, K & Peel, D A, 1990. "On Testing for Unbiasedness and Efficiency of Forecasts," The Manchester School of Economic & Social Studies, University of Manchester, vol. 58(2), pages 120-27, June.
  6. Karamouzis, N. & Lombra, R., 1988. "Federal Reserve Policy Making: An Overview And Analysis Of The Policy Process," Papers 0-88-8, Pennsylvania State - Department of Economics.
  7. Fildes, Robert & Stekler, Herman, 2002. "The state of macroeconomic forecasting," Journal of Macroeconomics, Elsevier, vol. 24(4), pages 435-468, December.
  8. Karamouzis, N. & Lombra, R., 1989. "Federal Reserve Policymaking: An Overview And Analisys Of The Policy Process," Papers 8-88-5, Pennsylvania State - Department of Economics.
  9. Scotese, Carol A., 1994. "Forecast smoothing and the optimal under-utilization of information at the federal reserve," Journal of Macroeconomics, Elsevier, vol. 16(4), pages 653-670.
  10. Christopher A. Sims, 2002. "The Role of Models and Probabilities in the Monetary Policy Process," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(2), pages 1-62.
  11. Jansen, Dennis W. & Kishan, Ruby Pandey, 1996. "An evaluation of federal reserve forecasting," Journal of Macroeconomics, Elsevier, vol. 18(1), pages 89-109.
  12. Joutz, Fred & Stekler, H. O., 2000. "An evaluation of the predictions of the Federal Reserve," International Journal of Forecasting, Elsevier, vol. 16(1), pages 17-38.
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