Are They Really Rational? Assessing Professional Macro-Economic Forecasts from the G7-Countries
AbstractIn this paper, we use survey data to analyze the rationality of professional macroeconomic forecasts. We analyze both individual forecasts and average forecasts. We provide evidence on the properties of forecasts for all the G7-counties and four different macroeconomic variables. Furthermore, we present a modification to the structural model which is commonly used to model the forecast errors of fixed event forecasts in the literature. Our results confirm that average forecasts should be used with caution, since even if all individual forecasts are rational the hypothesis of rationality is often rejected by the aggregate forecasts. We find that there are not only large differences in the performance of forecasters across countries but also across different macroeconomic variables; in general, forecasts tend to be biased in situations where forecasters have to learn about large structural shocks or gradual changes in the trend of a variable
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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1447.
Length: 47 pages
Date of creation: Sep 2008
Date of revision:
Evaluating forecasts; Macroeconomic Forecasting; Rationality; Survey Data; Fixed-Event Forecasts;
Find related papers by JEL classification:
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-10-07 (All new papers)
- NEP-ECM-2008-10-07 (Econometrics)
- NEP-FOR-2008-10-07 (Forecasting)
- NEP-MAC-2008-10-07 (Macroeconomics)
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