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Evaluating CPB's published GDP growth forecasts; a comparison with individual and pooled VAR based forecasts

Author

Listed:
  • Adam Elbourne

    (CPB Netherlands Bureau for Economic Policy Analysis)

  • Henk Kranendonk

    (CPB Netherlands Bureau for Economic Policy Analysis)

  • Rob Luginbuhl

    (CPB Netherlands Bureau for Economic Policy Analysis)

  • Bert Smid

    (CPB Netherlands Bureau for Economic Policy Analysis)

  • Martin Vromans

Abstract

We compare the accuracy of our published GDP growth forecasts from our large macro model, SAFFIER, to those produced by VAR based models using both classical and Bayesian estimation techniques. We employ a data driven methodology for selecting variables to include in our VAR models and we find that a randomly selected classical VAR model performs worse in most cases than the Bayesian equivalent, which performs worse than our published forecasts in most cases. However, when we pool forecasts across many VARs we can produce more accurate forecasts than we published. A review of the literature suggests that forecast accuracy is likely irrelevant for the non-forecasting activities the model is used for at CPB because they are fundamentally different activities.

Suggested Citation

  • Adam Elbourne & Henk Kranendonk & Rob Luginbuhl & Bert Smid & Martin Vromans, 2008. "Evaluating CPB's published GDP growth forecasts; a comparison with individual and pooled VAR based forecasts," CPB Document 172, CPB Netherlands Bureau for Economic Policy Analysis.
    • Handle: RePEc:cpb:docmnt:172
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    References listed on IDEAS

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    Cited by:

    1. Yvonne Adema & Kees Folmer & Gerrit Hugo Heuvelen & Sonny Kuijpers & Rob Luginbuhl & Bas Scheer, 2020. "Unemployment Forecasts: Room for Improvement?," De Economist, Springer, vol. 168(3), pages 403-417, September.
    2. Philip Franses, 2014. "Evaluating CPB’s Forecasts," De Economist, Springer, vol. 162(3), pages 215-221, September.

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    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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