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Evaluating German Business Cycle Forecasts Under an Asymmetric Loss Function

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  • Joerg Doepke

    ()
    (University of Applied Sciences Merseburg)

  • Ulrich Fritsche

    ()
    (Department for Socioeconomics, Department for Economics, University of Hamburg)

  • Boriss Siliverstovs

    ()
    (KOF Swiss Economic Institute, ETH Zurich)

Abstract

Based on annual data for growth and inflation forecasts for Germany covering the time span from 1970 to 2007 and up to 17 different forecasts per year, we test for a possible asymmetry of the forecasters' loss function and estimate the degree of asymmetry for each forecasting institution using the approach of Elliot et al. (2005). Furthermore, we test for the rationality of the forecasts under the assumption of a possibly asymmetric loss function and for the features of an optimal forecast under the assumption of a generalized loss function. We find only limited evidence for the existence of an asymmetric loss functions of German forecasters. As regards the rationality of the forecasts the results depend on the underlying assumption of the test. The rationality of inflation forecasts is more doubtful than those of growth forecasts.

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File URL: http://www.wiso.uni-hamburg.de/repec/hepdoc/macppr_5_2009.pdf
File Function: First version, 2009
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Bibliographic Info

Paper provided by Hamburg University, Department Wirtschaft und Politik in its series Macroeconomics and Finance Series with number 200905.

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Length: 46 pages
Date of creation: Jul 2009
Date of revision:
Handle: RePEc:hep:macppr:200905

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Web page: http://www.wiso.uni-hamburg.de/dwp
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Keywords: Business cycle forecast evaluation; asymmetric loss function; and rational expectations;

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References

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  1. Allan Timmermann & Graham Elliott & Ivana Komunjer, 2004. "Biases in Macroeconomic Forecasts: Irrationality or Asymmetric Loss?," Econometric Society 2004 North American Summer Meetings 601, Econometric Society.
  2. Patton, Andrew J. & Timmermann, Allan, 2007. "Testing Forecast Optimality Under Unknown Loss," Journal of the American Statistical Association, American Statistical Association, American Statistical Association, vol. 102, pages 1172-1184, December.
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  8. Steffen Osterloh, 2008. "Accuracy and Properties of German Business Cycle Forecasts," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, Duncker & Humblot, Berlin, vol. 54(1), pages 27-57.
  9. Hansen, Bruce E & West, Kenneth D, 2002. "Generalized Method of Moments and Macroeconomics," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 20(4), pages 460-69, October.
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  14. David Laster & Paul Bennett & In Sun Geoum, 1999. "Rational Bias In Macroeconomic Forecasts," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(1), pages 293-318, February.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. The loss aversion of economic forecasters
    by Economic Logician in Economic Logic on 2009-12-01 13:59:00
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Cited by:
  1. Pierdzioch, Christian & Rülke, Jan-Christoph & Stadtmann, Georg, 2012. "On the loss function of the Bank of Canada: A note," Economics Letters, Elsevier, vol. 115(2), pages 155-159.
  2. Tsuchiya, Yoichi, 2012. "Evaluating Japanese corporate executives’ forecasts under an asymmetric loss function," Economics Letters, Elsevier, vol. 116(3), pages 601-603.
  3. Hans Christian Müller-Dröge & Tara M. Sinclair & H.O. Stekler, 2014. "Evaluating Forecasts of a Vector of Variables: a German Forecasting Competition," CAMA Working Papers 2014-55, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  4. Christian Pierdzioch & Jan-Christoph R�lke & Georg Stadtmann, 2013. "Oil price forecasting under asymmetric loss," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 45(17), pages 2371-2379, June.
  5. Krüger, Jens J. & Hoss, Julian, 2012. "German business cycle forecasts, asymmetric loss and financial variables," Economics Letters, Elsevier, vol. 114(3), pages 284-287.
  6. Jens J. Krüger, 2014. "A multivariate evaluation of German output growth and inflation forecasts," Economics Bulletin, AccessEcon, vol. 34(3), pages 1410-1418.
  7. Jan-Christoph Ruelke, 2012. "Do Private Sector Forecasters Desire to Deviate From the German Council of Economic Experts?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 232(4), pages 414-428, July.
  8. Claudia M. Buch & Oliver Holtemöller, 2014. "Do We Need New Modelling Approaches in Macroeconomics?," IWH Discussion Papers, Halle Institute for Economic Research 8, Halle Institute for Economic Research.
  9. Ulrich Fritsche & Christian Pierdzioch & Jan-Christoph Ruelke & Georg Stadtmann, 2012. "Forecasting the Brazilian Real and the Mexican Peso: Asymmetric Loss, Forecast Rationality, and Forecaster Herding," Macroeconomics and Finance Series, Hamburg University, Department Wirtschaft und Politik 201202, Hamburg University, Department Wirtschaft und Politik.

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