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Does the federal reserve staff still beat private forecasters?

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  • Jung, Alexander
  • El-Shagi, Makram
  • Giesen, Sebastian

Abstract

The aim of this paper is to assess whether the findings of Romer and Romer (2000) on the superiority of staff forecasts are still valid today. The paper uses both latest available econometric techniques as well as conventional tests. Several tests for forecast rationality show that a necessary condition for good forecast performance is satisfied both for Greenbook and private forecasts, as measured by the Survey of Professional Forecasters (SPF). Tests for forecast accuracy and the encompassing test confirm the superiority of Greenbook forecasts for inflation and output using an extended sample (1968 to 2006). The relative forecast performance is, however, not robust in the presence of large macroeconomic shocks such as the Great Moderation and oil price shocks. Other econometric tests show that a relative better forecast performance by staff is observed when there is increased uncertainty. Staff JEL Classification: C53, E37, E52, E58

Suggested Citation

  • Jung, Alexander & El-Shagi, Makram & Giesen, Sebastian, 2014. "Does the federal reserve staff still beat private forecasters?," Working Paper Series 1635, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20141635
    Note: 2106626
    as

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    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp1635.pdf
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Thomas L. Hogan, 2022. "The calculus of dissent: Bias and diversity in FOMC projections," Public Choice, Springer, vol. 191(1), pages 105-135, April.
    2. Sylvester Eijffinger & Ronald Mahieu & Louis Raes, 2017. "Can the Fed Talk the Hind Legs Off the Stock Market?," International Journal of Central Banking, International Journal of Central Banking, vol. 13(1), pages 53-94, February.
    3. Pao‐Lin Tien & Tara M. Sinclair & Edward N. Gamber, 2021. "Do Fed Forecast Errors Matter?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 83(3), pages 686-712, June.
    4. Richhild Moessner & David-Jan Jansen & Jakob de Haan, 2017. "Communication About Future Policy Rates In Theory And Practice: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 31(3), pages 678-711, July.
    5. Michelle L. Barnes & Giovanni P. Olivei, 2017. "Financial variables and macroeconomic forecast errors," Working Papers 17-17, Federal Reserve Bank of Boston.
    6. Ana Cristina Pereira Das Neves, 2018. "The Mass Media Transmission Of Central Bank Communication Under Uncertainty," Anais do XLIV Encontro Nacional de Economia [Proceedings of the 44th Brazilian Economics Meeting] 54, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].

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    More about this item

    Keywords

    forecast performance; forecast rationality; forecast stability; greenbook forecasts; of professional forecasters; survey;
    All these keywords.

    JEL classification:

    • 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
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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