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The track record of the Commission's forecasts - an update

  • A. Melander
  • G. Sismanidis
  • D. Grenouilleau
Registered author(s):

    This paper has updated the assessment of the Commission's forecasts' track record from 1999 by extending the observation period from 1969-1997 to also take into account the forecasts and outcome for the years 1998-2005. This update has also included some further tests on e.g. informational efficiency and undertaken a comparison with the forecasts of other international institutions and those of market participants. The tests were carried out on the forecasts for real GDP growth, total investment, inflation, the unemployment rate, the general government balance and the current account to GDP ratio. Data have been processed in a broadly similar manner compared to the study of 1999 to ensure comparability to the greatest degree possible. Overall, the Commission's forecasts continue to dispose a reasonable track record. For instance, the forecast error for the GDP forecast, as measured by the mean absolute error, has improved by 0.03 percentage point (pp.) to 0.5 pp. for the current-year outlook and by 0.08 pp. to 0.86 pp. for the year ahead. This implies that the Commission's forecasts for GDP growth has, on average, proven to be 0.5 pp. too high / low for the current year. Forecasts for the EU generally seem to be unbiased, efficient and display a high success rate for directional accuracy. The same holds true for the outlook for most Member States, although there are individual examples to the contrary. Moreover, in view of the importance of the international environment in explaining past forecast errors, it is reassuring to note that the forecasts for the largest non-EU countries generally seem to perform well. Finally, the Commission's forecasts' track record for GDP is broadly comparable with the ones of Consensus, the IMF and the OECD.

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    File URL: http://ec.europa.eu/economy_finance/publications/publication9291_en.pdf
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    Paper provided by Directorate General Economic and Financial Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 291.

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    Length: 112 pages
    Date of creation: Oct 2007
    Date of revision:
    Handle: RePEc:euf:ecopap:0291
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    Web page: http://ec.europa.eu/economy_finance/index_en.htm
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    1. Sílvia Gonçalves & Lutz Kilian, 2003. "Bootstrapping Autoregressions with Conditional Heteroskedasticity of Unknown Form," CIRANO Working Papers 2003s-17, CIRANO.
    2. James G. MacKinnon, 2002. "Bootstrap inference in econometrics," Canadian Journal of Economics, Canadian Economics Association, vol. 35(4), pages 615-645, November.
    3. Russell Davidson & James G. MacKinnon, 2001. "Bootstrap Tests: How Many Bootstraps?," Working Papers 1036, Queen's University, Department of Economics.
    4. Bruce E. Hansen, 1999. "The Grid Bootstrap And The Autoregressive Model," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 594-607, November.
    5. Allan Timmermann, 2006. "An Evaluation of the World Economic Outlook Forecasts," IMF Working Papers 06/59, International Monetary Fund.
    6. Nicholas M. Kiefer & Timothy J. Vogelsang & Helle Bunzel, 2000. "Simple Robust Testing of Regression Hypotheses," Econometrica, Econometric Society, vol. 68(3), pages 695-714, May.
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