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Asymmetric loss in the Greenbook and the Survey of Professional Forecasters

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  • Wang, Yiyao
  • Lee, Tae-Hwy

Abstract

This paper examines the forecast rationality of the Greenbook and the Survey of Professional Forecasters (SPF) under asymmetric loss functions, using the method proposed by Elliott, Komunjer, and Timmermann (2005) with a rolling window strategy. Over rolling periods, the degree and direction of the asymmetry in forecast loss functions are time-varying. While rationality under symmetric loss is often rejected, forecast rationality under asymmetric loss fails to be rejected over nearly all rolling periods. Besides, real output growth is consistently under-predicted in the 1990s, and the inflation rate is consistently over-predicted in the 1980s and 1990s. In general, inflation forecasts, especially for long horizons, exhibit greater levels of loss asymmetry in magnitude and frequency. The loss asymmetry of real output growth forecasts is more pronounced when the last revised vintage data are used than when the real-time vintage is used. All of these results hold for both the Greenbook and SPF forecasts. The results are also similar with the use of different sets of instrumental variables for estimating the asymmetric loss and testing for forecast rationality.

Suggested Citation

  • Wang, Yiyao & Lee, Tae-Hwy, 2014. "Asymmetric loss in the Greenbook and the Survey of Professional Forecasters," International Journal of Forecasting, Elsevier, vol. 30(2), pages 235-245.
  • Handle: RePEc:eee:intfor:v:30:y:2014:i:2:p:235-245
    DOI: 10.1016/j.ijforecast.2013.07.017
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    3. Patrick Schmidt & Matthias Katzfuss & Tilmann Gneiting, 2021. "Interpretation of point forecasts with unknown directive," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 36(6), pages 728-743, September.
    4. Demetrescu, Matei & Hacıoğlu Hoke, Sinem, 2019. "Predictive regressions under asymmetric loss: Factor augmentation and model selection," International Journal of Forecasting, Elsevier, vol. 35(1), pages 80-99.
    5. Tsuchiya, Yoichi, 2015. "Herding behavior and loss functions of exchange rate forecasters over interventions and financial crises," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 266-276.
    6. Dovern, Jonas & Jannsen, Nils, 2017. "Systematic errors in growth expectations over the business cycle," International Journal of Forecasting, Elsevier, vol. 33(4), pages 760-769.
    7. Döpke, Jörg & Fritsche, Ulrich & Müller, Karsten, 2019. "Has macroeconomic forecasting changed after the Great Recession? Panel-based evidence on forecast accuracy and forecaster behavior from Germany," Journal of Macroeconomics, Elsevier, vol. 62(C).
    8. Döpke Jörg & Fritsche Ulrich & Waldhof Gabi, 2019. "Theories, Techniques and the Formation of German Business Cycle Forecasts : Evidence from a survey of professional forecasters," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 239(2), pages 203-241, April.
    9. Jörg Döpke & Ulrich Fritsche & Karsten Müller, 2018. "Has Macroeconomic Forecasting changed after the Great Recession? - Panel-based Evidence on Accuracy and Forecaster Behaviour from Germany," Macroeconomics and Finance Series 201803, University of Hamburg, Department of Socioeconomics.
    10. Yoichi Tsuchiya, 2022. "Evaluating plant managers’ production plans over business cycles: asymmetric loss and rationality," SN Business & Economics, Springer, vol. 2(8), pages 1-29, August.
    11. Döpke Jörg & Fritsche Ulrich & Waldhof Gabi, 2019. "Theories, Techniques and the Formation of German Business Cycle Forecasts : Evidence from a survey of professional forecasters," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 239(2), pages 203-241, April.
    12. Huh, Sungjun & Kim, Insu, 2020. "Growth forecast revisions over business cycles: Evidence from the Survey of Professional Forecasters," Economics Letters, Elsevier, vol. 196(C).
    13. Tsuchiya, Yoichi, 2016. "Asymmetric loss and rationality of Chinese renminbi forecasts: An implication for the trade between China and the US," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 44(C), pages 116-127.
    14. Behrens, Christoph, 2020. "German trade forecasts since 1970: An evaluation using the panel dimension," Working Papers 26, German Research Foundation's Priority Programme 1859 "Experience and Expectation. Historical Foundations of Economic Behaviour", Humboldt University Berlin.
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    16. Víctor López-Pérez, 2017. "Do professional forecasters behave as if they believed in the New Keynesian Phillips Curve for the euro area?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 44(1), pages 147-174, February.

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    More about this item

    Keywords

    Greenbook; SPF; Asymmetric loss; Forecast rationality; Real output growth forecasts; Inflation rate forecasts; Real time data; Revised data;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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