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Can the Fed predict the state of the economy?

  • Sinclair, Tara M.
  • Joutz, Fred
  • Stekler, H.O.

We show that systematic forecast errors reveal that the Fed is "surprised" by real and inflationary cycles. The Fed knows the state of the economy for the current quarter, but cannot predict it one-quarter ahead.

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File URL: http://www.sciencedirect.com/science/article/B6V84-4YTN3TY-8/2/5793b7903abba36bec12598629878811
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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 108 (2010)
Issue (Month): 1 (July)
Pages: 28-32

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Handle: RePEc:eee:ecolet:v:108:y:2010:i:1:p:28-32
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Graham Elliott & Ivana Komunjer & Allan Timmermann, 2005. "Biases In Macroeconomic Forecasts: Irrationality Or Asymmetric Loss?," CAMA Working Papers 2005-14, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  2. Joutz, Fred & Stekler, H. O., 2000. "An evaluation of the predictions of the Federal Reserve," International Journal of Forecasting, Elsevier, vol. 16(1), pages 17-38.
  3. Swanson, N.R. & van Dijk, D.J.C., 2001. "Are statistical reporting agencies getting it right? Data rationality and business cycle asymmetry," Econometric Institute Research Papers EI 2001-28, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  4. Carlos Capistrán, 2006. "Bias in Federal Reserve Inflation Forecasts: Is the Federal Reserve Irrational or Just Cautious?," Working Papers 2006-14, Banco de México.
  5. Jacob A. Mincer & Victor Zarnowitz, 1969. "The Evaluation of Economic Forecasts," NBER Chapters, in: Economic Forecasts and Expectations: Analysis of Forecasting Behavior and Performance, pages 1-46 National Bureau of Economic Research, Inc.
  6. Holden, K & Peel, D A, 1990. "On Testing for Unbiasedness and Efficiency of Forecasts," The Manchester School of Economic & Social Studies, University of Manchester, vol. 58(2), pages 120-27, June.
  7. Karen E. Dynan & Douglas Elmendorf, 2001. "Do provisional estimates of output miss economic turning points?," Finance and Economics Discussion Series 2001-52, Board of Governors of the Federal Reserve System (U.S.).
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