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Evaluating the economic forecasts of FOMC members

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  • Sheng, Xuguang (Simon)

Abstract

This paper provides a detailed analysis of the forecasts of real GDP, inflation and unemployment made by individual members of the Federal Open Market Committee (FOMC) for the period 1992–2003. Despite a general tendency for the committee members to underpredict real GDP over the sample period, we find evidence suggesting that the FOMC has a considerable amount of information about output growth, beyond what is known by commercial forecasters. We also document a substantial level of variation in the members’ forecasts, which can be explained in part by the differences in economic conditions between Federal Reserve districts. The members’ heterogeneous forecasts for output growth and inflation contain useful information for explaining their preferred policy settings, beyond that in the Greenbook forecasts.

Suggested Citation

  • Sheng, Xuguang (Simon), 2015. "Evaluating the economic forecasts of FOMC members," International Journal of Forecasting, Elsevier, vol. 31(1), pages 165-175.
  • Handle: RePEc:eee:intfor:v:31:y:2015:i:1:p:165-175
    DOI: 10.1016/j.ijforecast.2014.03.001
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    Cited by:

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    2. Ines Fortin & Sebastian P. Koch & Klaus Weyerstrass, 2020. "Evaluation of economic forecasts for Austria," Empirical Economics, Springer, vol. 58(1), pages 107-137, January.
    3. Guido Schultefrankenfeld, 2020. "Appropriate monetary policy and forecast disagreement at the FOMC," Empirical Economics, Springer, vol. 58(1), pages 223-255, January.
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    5. Ericsson, Neil R., 2016. "Eliciting GDP forecasts from the FOMC’s minutes around the financial crisis," International Journal of Forecasting, Elsevier, vol. 32(2), pages 571-583.
    6. Luiz Renato Lima & Lucas Lúcio Godeiro & Mohammed Mohsin, 2021. "Time-Varying Dictionary and the Predictive Power of FED Minutes," Computational Economics, Springer;Society for Computational Economics, vol. 57(1), pages 149-181, January.
    7. Natsuki Arai, 2016. "Evaluating the Efficiency of the FOMC's New Economic Projections," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(5), pages 1019-1049, August.
    8. Hamza Bennani, 2016. "Measuring Monetary Policy Stress for Fed District Representatives," Scottish Journal of Political Economy, Scottish Economic Society, vol. 63(2), pages 156-176, May.
    9. Messina, Jeffrey D. & Sinclair, Tara M. & Stekler, Herman, 2015. "What can we learn from revisions to the Greenbook forecasts?," Journal of Macroeconomics, Elsevier, vol. 45(C), pages 54-62.
    10. Ellis, Michael A. & Liu, Dandan, 2016. "FOMC forecasts and monetary policy deliberations," Economics Letters, Elsevier, vol. 147(C), pages 131-134.
    11. S. Yanki Kalfa & Jaime Marquez, 2019. "FOMC Forecasts: Are They Useful for Understanding Monetary Policy?," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 12(3), pages 1-17, August.

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