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Sluggish Forecasts

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  • Monica Jain

Abstract

Given the influence that agents’ expectations have on key macroeconomic variables, it is surprising that very few papers have tried to extrapolate agents’ “true” expectations directly from the data. This paper presents one such approach, starting with the hypothesis that there is sluggishness in inflation and real GDP growth forecasts. Using individual-level data on 29 U.S. professional forecasters from the Survey of Professional Forecasters, I find that some degree of sluggishness is present in about 40% of inflation forecasts and in 60% of real GDP growth forecasts. The estimates of sluggishness are then used to recover a series of sluggishness-adjusted expectations that are more volatile and, at times, more accurate than the raw survey forecasts.

Suggested Citation

  • Monica Jain, 2018. "Sluggish Forecasts," Staff Working Papers 18-39, Bank of Canada.
    • Handle: RePEc:bca:bocawp:18-39
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    References listed on IDEAS

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    Cited by:

    1. Jakub Rybacki, 2021. "Polish GDP forecast errors: a tale of inefficiency," Bank i Kredyt, Narodowy Bank Polski, vol. 52(2), pages 123-142.

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    More about this item

    Keywords

    Econometric and statistical methods; Inflation and prices;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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