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Forecasting FOMC Forecasts

Author

Listed:
  • S. Yanki Kalfa

    (Rady School of Management, The University of California at San Diego, La Jolla, CA 92093, USA)

  • Jaime Marquez

    (School of Advanced International Studies, Johns Hopkins, Washington, DC 20036, USA)

Abstract

(Hendry 1980, p. 403) The three golden rules of econometrics are “test, test, and test”. The current paper applies that approach to model the forecasts of the Federal Open Market Committee over 1992–2019 and to forecast those forecasts themselves. Monetary policy is forward-looking, and as part of the FOMC’s effort toward transparency, the FOMC publishes its (forward-looking) economic projections. The overall views on the economy of the FOMC participants–as characterized by the median of their projections for inflation, unemployment, and the Fed’s policy rate–are themselves predictable by information publicly available at the time of the FOMC’s meeting. Their projections also communicate systematic behavior on the part of the FOMC’s participants.

Suggested Citation

  • S. Yanki Kalfa & Jaime Marquez, 2021. "Forecasting FOMC Forecasts," Econometrics, MDPI, vol. 9(3), pages 1-21, September.
    • Handle: RePEc:gam:jecnmx:v:9:y:2021:i:3:p:34-:d:634996
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    References listed on IDEAS

    as
    1. Nakazono, Yoshiyuki, 2013. "Strategic behavior of Federal Open Market Committee board members: Evidence from members’ forecasts," Journal of Economic Behavior & Organization, Elsevier, vol. 93(C), pages 62-70.
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    3. 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.
    4. Fendel, Ralf & Rülke, Jan-Christoph, 2012. "Are heterogeneous FOMC forecasts consistent with the Fed’s monetary policy?," Economics Letters, Elsevier, vol. 116(1), pages 5-7.
    5. Jennifer L. Castle & David F. Hendry & Andrew B. Martinez, 2017. "Evaluating Forecasts, Narratives and Policy Using a Test of Invariance," Econometrics, MDPI, vol. 5(3), pages 1-27, September.
    6. Clements,Michael & Hendry,David, 1998. "Forecasting Economic Time Series," Cambridge Books, Cambridge University Press, number 9780521634809, Enero-Abr.
    7. Stekler, Herman & Symington, Hilary, 2016. "Evaluating qualitative forecasts: The FOMC minutes, 2006–2010," International Journal of Forecasting, Elsevier, vol. 32(2), pages 559-570.
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    Citations

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    Cited by:

    1. Carola Conces Binder & Rodrigo Sekkel, 2024. "Central bank forecasting: A survey," Journal of Economic Surveys, Wiley Blackwell, vol. 38(2), pages 342-364, April.
    2. Jaime Marquez, 2023. "Stylized Facts of the FOMC’s Longer-Run Forecasts," JRFM, MDPI, vol. 16(3), pages 1-20, February.
    3. Thomas L. Hogan, 2022. "The calculus of dissent: Bias and diversity in FOMC projections," Public Choice, Springer, vol. 191(1), pages 105-135, April.

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    Keywords

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    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics

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