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Predictive performance of the World Bank's commodity price projections

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  • Warr, Peter G.

Abstract

The World Bank's commodity price projections are widely used for various planning purposes. Two aspects of the Bank's projections of relative prices are studied in this paper. The first is whether the forecasts make efficient use of the information available at the time the forecast is made. The second JS whether the forecasts predict future prices with greater accuracy than alternative forecasting methods. These matters are studied by comparing the World Bank's past price projections with the actual prices that were subsequently observed. The results show that, overall, the World Bank forecasts do not pass either test. First, the World Bank forecasts are informationally inefficient. Prediction error (projection minus actual price) tends to be positively correlated with the projections themselves. Although the direction of future price movements tends to be correctly predicted, the magnitude of these movements tends to be overpredicted. Second, the World Bank forecasts do not perform well even compared with the simplest of alternative forecasting methods - the prediction of no change.
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Suggested Citation

  • Warr, Peter G., 1990. "Predictive performance of the World Bank's commodity price projections," Agricultural Economics, Blackwell, vol. 4(3-4), pages 365-379, December.
  • Handle: RePEc:eee:agecon:v:4:y:1990:i:3-4:p:365-379
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    1. Hendry, David F & Mizon, Grayham E, 1978. "Serial Correlation as a Convenient Simplification, not a Nuisance: A Comment on a Study of the Demand for Money by the Bank of England," Economic Journal, Royal Economic Society, vol. 88(351), pages 549-563, September.
    2. Ravallion, Martin, 1985. "The Information Efficiency of Traders' Price Expectations in a Bangladesh Price Market," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 47(2), pages 171-184, May.
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    Cited by:

    1. Boum-Jong Choe, 1990. "Rational expectations and commodity price forecasts," Policy Research Working Paper Series 435, The World Bank.
    2. Rosegrant, Mark W. & Perez, Nicostrato D., 1997. "Water resources development in Africa: a review and synthesis of issues, potentials, and strategies for the future," EPTD discussion papers 28, International Food Policy Research Institute (IFPRI).
    3. Eduardo Engel & Rodrigo Valdés, 2001. "Prediciendo el precio del cobre: ¿Más allá del camino aleatorio?," Documentos de Trabajo 100, Centro de Economía Aplicada, Universidad de Chile.
    4. Boum-Jong Choe, 1990. "Commodity price forecasts and futures prices," Policy Research Working Paper Series 436, The World Bank.

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