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FOMC Forecasts of Macroeconomic Risks

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Author Info
Kevin Dowd () (Nottingham University Business School)

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Abstract

This paper presents a new approach to the evaluation of FOMC macroeconomic forecasts. Its distinctive feature is the interpretation, under reasonable conditions, of the minimum and maximum forecasts reported in FOMC meetings as indicative of probability density forecasts for these variables. This leads to some straightforward binomial tests of the performance of the FOMC forecasts as forecasts of macroeconomic risks. Empirical results suggest that there are serious problems with the FOMC forecasts. Most particularly, there are problems with the FOMC forecasts of the tails of the macroeconomic density functions, including a tendency to under-estimate the tails of macroeconomic risks.

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File URL: http://www.nottingham.ac.uk/%7Elizecon/RePEc/pdf/12.pdf
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Publisher Info
Paper provided by Industrial Economics Division in its series Occasional Papers with number 12.

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Date of creation: 09 2004
Date of revision: 10 Jan 2004
Handle: RePEc:nub:occpap:12

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Related research
Keywords: Macroeconomic risks FOMC forecasts density forecasting

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Find related papers by JEL classification:
C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Other Model Applications
E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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References listed on IDEAS
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. Diebold, Francis X & Gunther, Todd A & Tay, Anthony S, 1998. "Evaluating Density Forecasts with Applications to Financial Risk Management," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 863-83, November.
  2. Fildes, Robert & Stekler, Herman, 2002. "The state of macroeconomic forecasting," Journal of Macroeconomics, Elsevier, vol. 24(4), pages 435-468, December. [Downloadable!] (restricted)
  3. Diebold, Francis X, 1998. "The Past, Present, and Future of Macroeconomic Forecasting," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 175-92, Spring. [Downloadable!] (restricted)
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  4. William T. Gavin, 2003. "FOMC forecasts: is all the information in the central tendency?," Working Papers 2003-002, Federal Reserve Bank of St. Louis. [Downloadable!]
    Other versions:
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Cited by:
(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. Ozun, Alper & Cifter, Atilla, 2007. "Portfolio Value-at-Risk with Time-Varying Copula: Evidence from the Americas," MPRA Paper 2711, University Library of Munich, Germany. [Downloadable!]
  2. William T. Gavin & Geetanjali Pande, 2008. "FOMC consensus forecasts," Review, Federal Reserve Bank of St. Louis, issue May, pages 149-164. [Downloadable!]
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