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Assessment of the \"official\" economic forecasts

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  • Stephen K. McNees

Abstract

While many studies have evaluated the accuracy of \"official\" economic forecasts, this study may be the first published analysis of the Federal Open Market Committee's \"Humphrey- Hawkins\" forecasts. In this article, the \"official\" forecasts generated by the Council of Economic Advisers (CEA), the Congressional Budget Office (CBO), and the Federal Open Market Committee (FOMC) are analyzed and compared to each other as well as to forecasts made by the private sector. The findings for the one-year-ahead forecasts reconfirm that the CEA, CBO, and private sector forecasts are about equally accurate while more accurate than simple rules of thumb. For the multiyear real GNP forecasts, however, evidence indicates that the forecasts of prominent commercial forecasters and the CBO are more accurate than those of the CEA, owing to an optimistic bias. In addition, the midpoints of the FOMC's longest forecasts outperform one standard private sector counterpart.

Suggested Citation

  • Stephen K. McNees, 1995. "Assessment of the \"official\" economic forecasts," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 13-23.
    • Handle: RePEc:fip:fedbne:y:1995:i:jul:p:13-23
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    Citations

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    Cited by:

    1. Palle S. Andersen, 1997. "Forecast errors and financial developments," BIS Working Papers 51, Bank for International Settlements.
    2. Swanson, Eric T., 2004. "Signal Extraction And Non-Certainty-Equivalence In Optimal Monetary Policy Rules," Macroeconomic Dynamics, Cambridge University Press, vol. 8(1), pages 27-50, February.
    3. Jeffrey Frankel, 2011. "Over-optimism in forecasts by official budget agencies and its implications," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 27(4), pages 536-562.
    4. Todd E. Clark, 1998. "Progress toward price stability : a 1997 inflation report," Economic Review, Federal Reserve Bank of Kansas City, vol. 83(Q I), pages 5-21.
    5. Jeffrey Frankel, 2013. "A Solution to Fiscal Procyclicality: The Structural Budget Institutions Pioneered by Chile," Central Banking, Analysis, and Economic Policies Book Series, in: Luis Felipe Céspedes & Jordi Galí (ed.),Fiscal Policy and Macroeconomic Performance, edition 1, volume 17, chapter 9, pages 323-391, Central Bank of Chile.
    6. Andrew B. Martinez, 2011. "Comparing Government Forecasts of the United States’ Gross Federal Debt," Working Papers 2011-002, The George Washington University, Department of Economics, H. O. Stekler Research Program on Forecasting.
    7. Paul Bennett & In Sun Geoum & David S. Laster, 1996. "Rational bias in macroeconomic forecasts," Research Paper 9617, Federal Reserve Bank of New York.
    8. Frankel, Jeffrey, 2011. "A Solution to Overoptimistic Forecasts and Fiscal Procyclicality: The Structural Budget Institutions Pioneered by Chile," Working Paper Series 11-012, Harvard University, John F. Kennedy School of Government.
    9. William T. Gavin & Geetanjali Pande, 2008. "FOMC consensus forecasts," Review, Federal Reserve Bank of St. Louis, vol. 90(May), pages 149-164.
    10. Sheng, Xuguang (Simon), 2015. "Evaluating the economic forecasts of FOMC members," International Journal of Forecasting, Elsevier, vol. 31(1), pages 165-175.

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    Keywords

    Forecasting;

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