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Federal Reserve Information during the Great Moderation

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Author Info

  • Antonello D’Agostino

    (Central Bank)

  • Karl Whelan

    (University College Dublin)

Abstract

Using data from the period 1970-1991, Romer and Romer (2000) showed that Federal Reserve forecasts of inflation and output were superior to those provided by commercial forecasters. In this paper, we show that this superior forecasting performance deterio- rated after 1991. Over the decade 1992-2001, the superior forecast accuracy of the Fed held only over a very short time horizon and was limited to its forecasts of inflation. In addition, the performance of both the Fed and the commercial forecasters in pre- dicting inflation and output, relative to that of “naive” benchmark models, dropped remarkably during this period.

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File URL: http://www.ucd.ie/economics/research/papers/2007/WP07.22.pdf
File Function: First version, 2007
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Bibliographic Info

Paper provided by School Of Economics, University College Dublin in its series Working Papers with number 200722.

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Length: 17 pages
Date of creation: 22 Dec 2007
Date of revision:
Handle: RePEc:ucn:wpaper:200722

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  1. James H. Stock & Mark W. Watson, 2007. "Why Has U.S. Inflation Become Harder to Forecast?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(s1), pages 3-33, 02.
  2. Andrew Atkeson & Lee E. Ohanian., 2001. "Are Phillips curves useful for forecasting inflation?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-11.
  3. D'Agostino, Antonello & Domenico, Giannone & Surico, Paolo, 2006. "(Un)Predictability and Macroeconomic Stability," Research Technical Papers 5/RT/06, Central Bank of Ireland.
  4. David H. Romer & Christina D. Romer, 2000. "Federal Reserve Information and the Behavior of Interest Rates," American Economic Review, American Economic Association, vol. 90(3), pages 429-457, June.
  5. Christopher A. Sims, 2002. "The Role of Models and Probabilities in the Monetary Policy Process," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(2), pages 1-62.
  6. repec:fip:fedgsq:y:2006:i:mar20 is not listed on IDEAS
  7. Campbell, Sean D., 2007. "Macroeconomic Volatility, Predictability, and Uncertainty in the Great Moderation: Evidence From the Survey of Professional Forecasters," Journal of Business & Economic Statistics, American Statistical Association, vol. 25, pages 191-200, April.
  8. Faust Jon & Swanson Eric T & Wright Jonathan H, 2004. "Do Federal Reserve Policy Surprises Reveal Superior Information about the Economy?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 4(1), pages 1-31, October.
  9. Ben S. Bernanke, 2006. "Reflections on the yield curve and monetary policy," Speech 175, Board of Governors of the Federal Reserve System (U.S.).
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Citations

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Cited by:
  1. Jung, Alexander & El-Shagi, Makram & Giesen, Sebastian, 2013. "Does Central Bank Staff Beat Private Forecasters?," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79925, Verein für Socialpolitik / German Economic Association.
  2. Liebermann, Joelle, 2012. "Real-time forecasting in a data-rich environment," MPRA Paper 39452, University Library of Munich, Germany.
  3. repec:spo:wpecon:info:hdl:2441/f4rshpf3v1umfa09lat09b1bg is not listed on IDEAS
  4. Ichiro Muto, 2007. "Productivity Growth, Transparency, and Monetary Policy," IMES Discussion Paper Series 07-E-08, Institute for Monetary and Economic Studies, Bank of Japan.
  5. Ásgeir Daníelsson, 2008. "Accuracy in forecasting macroeconomic variables in Iceland," Economics wp39, Department of Economics, Central bank of Iceland.
  6. Paul Hubert, 2010. "Monetary Policy, Imperfect Information and the Expectations Channel," Sciences Po publications info:hdl:2441/f4rshpf3v1u, Sciences Po.
  7. João Valle e Azevedo, 2011. "Rational vs. professional forecasts," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.
  8. Kishor N. Kundan, 2010. "The Superiority of Greenbook Forecasts and the Role of Recessions," National Bank of Poland Working Papers 74, National Bank of Poland, Economic Institute.
  9. El-Shagi, Makram & Giesen, Sebastian & Jung, Alexander, 2014. "Does the federal reserve staff still beat private forecasters?," Working Paper Series 1635, European Central Bank.
  10. Henning Fischer & Marta García-Bárzana & Peter Tillmann & Peter Winker, 2012. "Evaluating FOMC forecast ranges: an interval data approach," MAGKS Papers on Economics 201213, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  11. Ásgeir Daníelsson, 2008. "The great moderation Icelandic style," Economics wp38, Department of Economics, Central bank of Iceland.
  12. Daniel L. Thornton, 2009. "How did we get to inflation targeting and where do we go now? a perspective from the U.S. experience," Working Papers 2009-038, Federal Reserve Bank of St. Louis.

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