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Continuities and Discontinuities in Economic Forecasting

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  • Tara M. Sinclair

    () (The George Washington University)

Abstract

Throughout the history of macroeconomic forecasting, several major themes have remained surprisingly consistent. The failure to forecast economic downturns ahead of time is perhaps the most significant of these. Forecasting approaches have changed, but forecasts for recessions have not improved. What can we learn from past evaluations of macroeconomic forecasts? Is it possible to predict major economic shocks or is it a fool’s errand? This chapter discusses how forecasting techniques have evolved over time and yet the record on forecasting recessions remains dismal. There are several competing hypotheses for why forecasters fail to foresee recessions, but little evidence any of them are going to be addressed before the next recession occurs. This suggests planners and policymakers should expect to be surprised by the arrival of downturns and develop ways to be prepared for recessions without having clear warning of their coming.

Suggested Citation

  • Tara M. Sinclair, 2019. "Continuities and Discontinuities in Economic Forecasting," Working Papers 2019-003, The George Washington University, Department of Economics, Research Program on Forecasting.
  • Handle: RePEc:gwc:wpaper:2019-003
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    File URL: https://www2.gwu.edu/~forcpgm/2019-003.pdf
    File Function: First version, 2019
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    References listed on IDEAS

    as
    1. Sinclair, Tara M. & Joutz, Fred & Stekler, H.O., 2010. "Can the Fed predict the state of the economy?," Economics Letters, Elsevier, vol. 108(1), pages 28-32, July.
    2. Mathy, Gabriel & Stekler, Herman, 2017. "Expectations and forecasting during the Great Depression: Real-time evidence from the business press," Journal of Macroeconomics, Elsevier, vol. 53(C), pages 1-15.
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    4. Stekler, H O, 1972. "An Analysis of Turning Point Forecasts," American Economic Review, American Economic Association, vol. 62(4), pages 724-729, September.
    5. repec:fip:fedpei:00034 is not listed on IDEAS
    6. Fildes, Robert & Stekler, Herman, 2002. "Reply to the comments on 'The state of macroeconomic forecasting'," Journal of Macroeconomics, Elsevier, vol. 24(4), pages 503-505, December.
    7. Stekler, H.O., 2007. "The future of macroeconomic forecasting: Understanding the forecasting process," International Journal of Forecasting, Elsevier, vol. 23(2), pages 237-248.
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    9. Stark, Tom & Croushore, Dean, 2002. "Forecasting with a real-time data set for macroeconomists," Journal of Macroeconomics, Elsevier, vol. 24(4), pages 507-531, December.
    10. Genre, Véronique & Kenny, Geoff & Meyler, Aidan & Timmermann, Allan, 2013. "Combining expert forecasts: Can anything beat the simple average?," International Journal of Forecasting, Elsevier, vol. 29(1), pages 108-121.
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    12. Ang, Andrew & Bekaert, Geert & Wei, Min, 2007. "Do macro variables, asset markets, or surveys forecast inflation better?," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1163-1212, May.
    13. Messina, Jeffrey D. & Sinclair, Tara M. & Stekler, Herman, 2015. "What can we learn from revisions to the Greenbook forecasts?," Journal of Macroeconomics, Elsevier, vol. 45(C), pages 54-62.
    14. Don Harding & Adrian Pagan, 2016. "The Econometric Analysis of Recurrent Events in Macroeconomics and Finance," Economics Books, Princeton University Press, edition 1, number 10744, September.
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    More about this item

    Keywords

    Forecast evaluation; recessions;

    JEL classification:

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

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