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The Accuracy of European Growth and Inflation Forecasts

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  • Öller, Lars-Erik

    ()
    (National Institute of Economic Research)

  • Barot, Bharat

    (National Institute of Economic Research)

Abstract

One-year-ahead forecasts by the OECD and by national institutes of GDP growth and inflation in 13 European countries are analysed. RMSE was large: 1.9 % for growth and 1.6 % for inflation. Six (11) OECD and 10 (7) institute growth forecast records were significantly better than an average growth forecast (the current year forecast). All full record-length inflation forecasts were significantly better than both naive alternatives. There was no significant difference in accuracy between the forecasts of the OECD and the institutes. Two forecasts were found to be biased and one had autocorrelated errors. Directional forecasts were significantly better than a naive alternative in one-half of the cases. Overall, inflation forecasts were significantly more accurate than growth forecasts, and in contrast to growth forecasts, they generally improved over time. This has implications for economic policy. Positively biased revisions reveal large errors in data.

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Bibliographic Info

Paper provided by National Institute of Economic Research in its series Working Paper with number 72.

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Length: 44 pages
Date of creation: 01 Feb 2000
Date of revision:
Handle: RePEc:hhs:nierwp:0072

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Keywords: Forecast accuracy; Directional errors; Forecast tests;

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