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An assessment of the EU growth forecasts under asymmetric preferences

  • George A. Christodoulakis

    (Manchester Business School, University of Manchester, Booth Street West, Manchester M15 6PB, UK)

  • Emmanuel C. Mamatzakis

    (Department of Economics, University of Macedonia, Egnatia 156, Thessaloniki 540 06, Greece)

EU Commission forecasts are used as a benchmark within the framework of the Stability and Growth Pact, aimed at providing a prudential view of economic outlook, especially for member states in an Excessive Deficit Procedure. Following Elliott et al. (2005), we assess whether there exist asymmetries in the loss preference of the Commission's GDP growth forecasts from 1969 to 2004. Our empirical evidence is robust across information sets and reveals that the loss preferences tend to show some variation in terms of asymmetry across member states. Given certain conditions concerning the time horizon of forecasts and the functional form of the loss preferences, the evidence further reveals that the Commission forecasting exercise could be subject to caveats. Copyright © 2008 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/for.1073
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Article provided by John Wiley & Sons, Ltd. in its journal Journal of Forecasting.

Volume (Year): 27 (2008)
Issue (Month): 6 ()
Pages: 483-492

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Handle: RePEc:jof:jforec:v:27:y:2008:i:6:p:483-492
DOI: 10.1002/for.1073
Contact details of provider: Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/2966

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  1. Graham Elliott & Ivana Komunjer & Allan Timmermann, 2005. "Biases In Macroeconomic Forecasts: Irrationality Or Asymmetric Loss?," CAMA Working Papers 2005-14, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  2. Michael Artis & Massimiliano Marcellino, 2001. "Fiscal forecasting: The track record of the IMF, OECD and EC," Econometrics Journal, Royal Economic Society, vol. 4(1), pages S20-S36.
  3. Graham Elliott & Allan Timmermann & Ivana Komunjer, 2005. "Estimation and Testing of Forecast Rationality under Flexible Loss," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 1107-1125.
  4. Jacob A. Mincer & Victor Zarnowitz, 1969. "The Evaluation of Economic Forecasts," NBER Chapters, in: Economic Forecasts and Expectations: Analysis of Forecasting Behavior and Performance, pages 3-46 National Bureau of Economic Research, Inc.
  5. Batchelor, Roy & Peel, David A., 1998. "Rationality testing under asymmetric loss," Economics Letters, Elsevier, vol. 61(1), pages 49-54, October.
  6. Christodoulakis, George A., 2005. "Financial forecasts in the presence of asymmetric loss aversion, skewness and excess kurtosis," Finance Research Letters, Elsevier, vol. 2(4), pages 227-233, December.
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