Has macroeconomic forecasting changed after the Great Recession? Panel-based evidence on forecast accuracy and forecaster behavior from Germany

We analyze the forecast accuracy for the periods before and after the Great Recession using a panel of annual data for 17 growth and inflation forecasts from 14 German institutions. We find only small differences in the quantitative accuracy measures between the two periods. The qualitative measures of forecast accuracy have slightly worsened and forecasters’ behavior has changed after the crisis. Errors in predicting directional change, however, have changed significantly between the two periods under investigation. Tests for the efficiency of the forecasts over the entire sample indicate that growth and inflation forecasts are inefficient. We find a changed correlation between forecast errors of inflation and growth after the crisis, which might hint at a changed forecaster behavior. The estimated loss functions before and after the crisis support this interpretation, suggesting a stronger incentive to avoid overestimation of growth and underestimation of inflation after the crisis. Estimating loss functions for a 10-year rolling window also reveal shifts in the level and direction of loss asymmetry.