Evaluating the forecast quality of GDP components: An application to G7
AbstractWe evaluate the quality of OECD's and IMF's forecasts for real GDP growth and for GDP expenditure components. We use a scaled statistic to compare the prediction models' performance across GDP components with different volatilities and decompose the GDP forecast error into the corresponding component contributions. Moreover, we use two recently proposed statistics - Mean of Total Weighted Absolute Error and Mean of Total Weighted Squared Error - to evaluate the overall accuracy of component predictions. We conclude that overpredictions in investment and net exports explain GDP overpredictions at 1-year horizons. Accurate GDP forecasts for same-year predictions are mostly explained by canceling out effects in component prediction errors - mainly in exports and imports - rather than by accurate component predictions. We also show that forecasts are in general inefficient for both GDP and its components and that the 2008 crisis had a large negative effect on the quality of forecasts being issued, but not on the predictive quality of forecast models.
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Bibliographic InfoPaper provided by Gabinete de Estratégia e Estudos, Ministério da Economia e da Inovação in its series GEE Papers with number 0047.
Length: 32 pages
Date of creation: Apr 2012
Date of revision: Apr 2012
Forecast evaluation; GDP expenditure components; Mean of total weighted absolute error; Mean of total weighted squared error; G7; 2008 crisis;
Find related papers by JEL classification:
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
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