Reputation and Forecast Revisions: Evidence from the FOMC
AbstractThis paper investigates how FOMC members revise their forecasts for key macroeconomic variables. Based on a new data set of forecasts from individual FOMC members between 1992 and 2000 it is shown that FOMC members intentionally overrevise their forecasts at the first revision and underrevise at the final revision date. This pattern of rationally biased forecasts is similar to that of private sector forecasters and is consistent with theories of reputation building among forecasters. The FOMC’s shift towards more transparency in 1994 had an impact on how members revised their forecasts and intensified the tendency to underrevise at the later stage of the forecasting process. The tendency to underrevise, i.e. to smooth forecast revisions, is particularly strong for nonvoting members of the committee.
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Bibliographic InfoPaper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 201128.
Length: 21 pages
Date of creation: 2011
Date of revision:
Publication status: Forthcoming in
biased forecasts; reputation; forecast errors; monetary policy; transparency; Federal Reserve;
Find related papers by JEL classification:
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
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