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Are Macroeconomic Forecasts Informative? Cointegration Evidence from the ASA-NBER Surveys

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Yin-Wong Cheung
Menzie D. Chinn

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Abstract

We examine the properties of the ASA-NBER forecasts for several US macroeconomic variables, specifically: (i) are the actual and forecast series integrated of the same order; (ii) are they cointegrated, and; (iii) is the cointegrating vector consistent with long run unitary elasticity of expectations with respect to the actual series. We also examine whether forecasts respond to error correction terms. Tests are applied to both final and preliminary versions of the data. We find that the Treasury bill rate, housing starts, industrial production, inflation and their forecasts are trend stationary. The corporate bond rate, GNP, the GNP deflator, unemployment and their forecasts are difference stationary. About half of the these pairs are cointegrated, with the unitary elasticity restriction seldom rejected. Similar results are obtained when using the originally-reported data.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6926.

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Date of creation: Feb 1999
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Handle: RePEc:nbr:nberwo:6926

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E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation
C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Other Model Applications

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Dokko, Yoon & Edelstein, Robert H, 1989. "How Well Do Economists Forecast Stock Market Prices? A Study of the Livingston Surveys," American Economic Review, American Economic Association, vol. 79(4), pages 865-71, September. [Downloadable!] (restricted)
  2. Cheung, Yin-Wong & Lai, Kon S, 1995. "Lag Order and Critical Values of the Augmented Dickey-Fuller Test," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(3), pages 277-80, July.
  3. Dominguez, Kathryn M., 1986. "Are foreign exchange forecasts rational? : New evidence from survey data," Economics Letters, Elsevier, vol. 21(3), pages 277-281. [Downloadable!] (restricted)
    Other versions:
  4. Kajal Lahiri & T. S. Chun, 1989. "Some Tests For Unbiasedness In The Long Run Using Survey Data," International Economic Journal, Korean International Economic Association, vol. 3(2), pages 27-42, June. [Downloadable!] (restricted)
  5. Keane, Michael P & Runkle, David E, 1990. "Testing the Rationality of Price Forecasts: New Evidence from Panel Data," American Economic Review, American Economic Association, vol. 80(4), pages 714-35, September. [Downloadable!] (restricted)
  6. Victor Zarnowitz & Phillip Braun, 1994. "Twenty-two Years of the NBER-ASA Quarterly Economic Outlook Surveys: Aspects and Comparisons of Forecasting Performance," NBER Working Papers 3965, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Bonham, Carl & Cohen, Richard, 1995. "Testing the Rationality of Price Forecasts: Comment," American Economic Review, American Economic Association, vol. 85(1), pages 284-89, March. [Downloadable!] (restricted)
  8. Hall, Alastair R, 1994. "Testing for a Unit Root in Time Series with Pretest Data-Based Model Selection," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(4), pages 461-70, October.
  9. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254. [Downloadable!] (restricted)
  10. Aggarwal, Raj & Mohanty, Sunil & Song, Frank, 1995. "Are Survey Forecasts of Macroeconomic Variables Rational?," Journal of Business, University of Chicago Press, vol. 68(1), pages 99-119, January. [Downloadable!] (restricted)
  11. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  12. Cheung, Y. -W. & Chinn, M. D., 1998. "Integration, cointegration and the forecast consistency of structural exchange rate models," Journal of International Money and Finance, Elsevier, vol. 17(5), pages 813-830, October. [Downloadable!] (restricted)
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  13. Fischer, Andreas M, 1989. "Unit Roots and Survey Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 51(4), pages 451-63, November.
  14. Victor Zarnowitz & Phillip Braun, 1993. "Twenty-two Years of the NBER-ASA Quarterly Economic Outlook Surveys: Aspects and Comparisons of Forecasting Performance," NBER Chapters, in: Business Cycles, Indicators and Forecasting, pages 11-94 National Bureau of Economic Research, Inc. [Downloadable!]
  15. A. Steven Englander & Gary Stone, 1989. "Inflation expectations surveys as predictors of inflation and behavior in financial and labor markets," Research Paper 8918, Federal Reserve Bank of New York.
  16. Liu, Peter C. & Maddala, G. S., 1992. "Rationality of survey data and tests for market efficiency in the foreign exchange markets," Journal of International Money and Finance, Elsevier, vol. 11(4), pages 366-381, August. [Downloadable!] (restricted)
  17. A. Steven Englander & Gary Stone, 1989. "Inflation expectations surveys as predictors of inflation and behavior in financial and labor markets," Quarterly Review, Federal Reserve Bank of New York, issue Fall, pages 20-32.
  18. Bonham, Carl S & Dacy, Douglas C, 1991. "In Search of a "Strictly Rational" Forecast," The Review of Economics and Statistics, MIT Press, vol. 73(2), pages 245-53, May. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Graham Elliott & Michael Jansson & Elena Pesavento, 2003. "Optimal Power For Testing Potential Cointegrating Vectors with Known Parameters for Nonstationarity," Emory Economics 0303, Department of Economics, Emory University (Atlanta). [Downloadable!]
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  2. Gerberding, Christina, 2001. "The information content of survey data on expected price developments for monetary policy," Discussion Paper Series 1: Economic Studies 2001,09, Deutsche Bundesbank, Research Centre. [Downloadable!]
  3. Bradley T. Ewing & Yongsheng Wang, 2005. "Single housing starts and macroeconomic activity: an application of generalized impulse response analysis," Applied Economics Letters, Taylor and Francis Journals, vol. 12(3), pages 187-190, February. [Downloadable!] (restricted)
  4. Graham Elliott & Michael Jansson & Elena Pesavento, 2004. "Optimal Power for Testing Potential Cointegrating Vectors with Known," University of California at San Diego, Economics Working Paper Series 2004-08, Department of Economics, UC San Diego. [Downloadable!]
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