IDEAS home Printed from https://ideas.repec.org/p/hhs/nierwp/0072.html
   My bibliography  Save this paper

The Accuracy of European Growth and Inflation Forecasts

Author

Listed:
  • Öller, Lars-Erik

    (National Institute of Economic Research)

  • Barot, Bharat

    (National Institute of Economic Research)

Abstract

One-year-ahead forecasts by the OECD and by national institutes of GDP growth and inflation in 13 European countries are analysed. RMSE was large: 1.9 % for growth and 1.6 % for inflation. Six (11) OECD and 10 (7) institute growth forecast records were significantly better than an average growth forecast (the current year forecast). All full record-length inflation forecasts were significantly better than both naive alternatives. There was no significant difference in accuracy between the forecasts of the OECD and the institutes. Two forecasts were found to be biased and one had autocorrelated errors. Directional forecasts were significantly better than a naive alternative in one-half of the cases. Overall, inflation forecasts were significantly more accurate than growth forecasts, and in contrast to growth forecasts, they generally improved over time. This has implications for economic policy. Positively biased revisions reveal large errors in data.

Suggested Citation

  • Öller, Lars-Erik & Barot, Bharat, 2000. "The Accuracy of European Growth and Inflation Forecasts," Working Papers 72, National Institute of Economic Research.
    • Handle: RePEc:hhs:nierwp:0072
    as

    Download full text from publisher

    File URL: http://www.konj.se/download/18.42684e214e71a39d0723ab3/1436518545643/Working-Paper-72-The-Accuracy-of-European+Growth-and-Inflation-Forecasts.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Francis X. Diebold & Todd A. Gunther & Anthony S. Tay, "undated". "Evaluating Density Forecasts," CARESS Working Papres 97-18, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
    2. repec:lan:wpaper:425 is not listed on IDEAS
    3. Brown, Bryan W & Maital, Shlomo, 1981. "What Do Economists Know? An Empirical Study of Experts' Expectations," Econometrica, Econometric Society, vol. 49(2), pages 491-504, March.
    4. Granger, Clive W J, 1996. "Can We Improve the Perceived Quality of Economic Forecasts?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(5), pages 455-473, Sept.-Oct.
    5. Ash, J. C. K. & Smyth, D. J. & Heravi, S. M., 1998. "Are OECD forecasts rational and useful?: a directional analysis," International Journal of Forecasting, Elsevier, vol. 14(3), pages 381-391, September.
    6. Fildes, Robert & Stekler, Herman, 2002. "The state of macroeconomic forecasting," Journal of Macroeconomics, Elsevier, vol. 24(4), pages 435-468, December.
    7. Filip Keereman, 1999. "The track record of the Commission forecasts," European Economy - Economic Papers 2008 - 2015 137, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    8. McNees, Stephen K., 1989. "Forecasts and actuals: The trade-off between timeliness and accuracy," International Journal of Forecasting, Elsevier, vol. 5(3), pages 409-416.
    9. Zellner, Arnold, 1986. "Biased predictors, rationality and the evaluation of forecasts," Economics Letters, Elsevier, vol. 21(1), pages 45-48.
    10. Diebold, Francis X & Mariano, Roberto S, 2002. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 134-144, January.
    11. Francis X. Diebold & Anthony S. Tay & Kenneth F. Wallis, 1997. "Evaluating Density Forecasts of Inflation: The Survey of Professional Forecasters," NBER Working Papers 6228, National Bureau of Economic Research, Inc.
    12. Clements,Michael & Hendry,David, 1998. "Forecasting Economic Time Series," Cambridge Books, Cambridge University Press, number 9780521634809, January.
    13. McNees, Stephen K, 1986. "Forecasting Accuracy of Alternative Techniques: A Comparison of U.S. Macroeconomic Forecasts: Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 4(1), pages 1-23, January.
    14. McNees, Stephen K, 1986. "Forecasting Accuracy of Alternative Techniques: A Comparison of U.S. Macroeconomic Forecasts," Journal of Business & Economic Statistics, American Statistical Association, vol. 4(1), pages 5-15, January.
    15. repec:lan:wpaper:413 is not listed on IDEAS
    16. Mr. Michael J. Artis, 1996. "How Accurate Are the Imf's Short-Term Forecasts? Another Examination of the World Economic Outlook," IMF Working Papers 1996/089, International Monetary Fund.
    17. Victor Zarnowitz, 1992. "Business Cycles: Theory, History, Indicators, and Forecasting," NBER Books, National Bureau of Economic Research, Inc, number zarn92-1, March.
    18. Wallis, Kenneth F, 1989. "Macroeconomic Forecasting: A Survey," Economic Journal, Royal Economic Society, vol. 99(394), pages 28-61, March.
    19. repec:lan:wpaper:539557 is not listed on IDEAS
    20. McNees, Stephen K, 1978. "The "Rationality" of Economic Forecasts," American Economic Review, American Economic Association, vol. 68(2), pages 301-305, May.
    21. Mills, Terence C. & Pepper, Gordon T., 1999. "Assessing the forecasters: an analysis of the forecasting records of the Treasury, the London Business School and the National Institute," International Journal of Forecasting, Elsevier, vol. 15(3), pages 247-257, July.
    22. Zarnowitz, Victor, 1992. "Business Cycles," National Bureau of Economic Research Books, University of Chicago Press, number 9780226978901, December.
    23. Stephen K. McNees, 1992. "How large are economic forecast errors?," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 25-42.
    24. Unknown, 1986. "Letters," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 1(4), pages 1-9.
    25. repec:lan:wpaper:470 is not listed on IDEAS
    26. N/A, 1969. "How Well Does the National Institute Forecast ?," National Institute Economic Review, National Institute of Economic and Social Research, vol. 50(1), pages 40-52, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Barot, Bharat, 2007. "Empirical Studies in Consumption, House Prices and the Accuracy of European Growth and Inflation Forecasts," Working Papers 98, National Institute of Economic Research.
    2. Fildes, Robert & Stekler, Herman, 2002. "The state of macroeconomic forecasting," Journal of Macroeconomics, Elsevier, vol. 24(4), pages 435-468, December.
    3. repec:lan:wpaper:470 is not listed on IDEAS
    4. repec:lan:wpaper:539557 is not listed on IDEAS
    5. repec:lan:wpaper:425 is not listed on IDEAS
    6. repec:lan:wpaper:413 is not listed on IDEAS
    7. Vuchelen, Jef & Gutierrez, Maria-Isabel, 2005. "A direct test of the information content of the OECD growth forecasts," International Journal of Forecasting, Elsevier, vol. 21(1), pages 103-117.
    8. Silva Lopes, Artur, 1994. "A "hipótese das expectativas racionais": teoria e realidade (uma visita guiada à literatura até 1992) [The "rational expectations hypothesis": theory and reality (a guided tour ," MPRA Paper 9699, University Library of Munich, Germany, revised 23 Jul 2008.
    9. Croushore Dean, 2010. "An Evaluation of Inflation Forecasts from Surveys Using Real-Time Data," The B.E. Journal of Macroeconomics, De Gruyter, vol. 10(1), pages 1-32, May.
    10. Jordi Pons, 2001. "The rationality of price forecasts: a directional analysis," Applied Financial Economics, Taylor & Francis Journals, vol. 11(3), pages 287-290.
    11. Jan Babecky & Jiri Podpiera, 2008. "Inflation Forecasts Errors in the Czech Republic: Evidence from a Panel of Institutions," Occasional Publications - Chapters in Edited Volumes, in: Katerina Smidkova (ed.), Evaluation of the Fulfilment of the CNB's Inflation Targets 1998-2007, chapter 6, pages 77-85, Czech National Bank.
    12. Karine Bouthevillain, 1993. "La prévision macro-économique : précision relative et consensus," Économie et Prévision, Programme National Persée, vol. 108(2), pages 97-126.
    13. Ildeberta Abreu, 2011. "International organisations’ vs. private analysts’ forecasts: an evaluation," Working Papers w201120, Banco de Portugal, Economics and Research Department.
    14. Mihaela Simionescu, 2015. "The Accuracy Analysis of Inflation Rate Forecasts in Euro Area," Global Economic Observer, "Nicolae Titulescu" University of Bucharest, Faculty of Economic Sciences;Institute for World Economy of the Romanian Academy, vol. 3(1), pages 80-85, May.
    15. Heilemann, Ullrich & Stekler, H. O., 2003. "Has the accuracy of German macroeconomic forecasts improved?," Technical Reports 2003,31, Technische Universität Dortmund, Sonderforschungsbereich 475: Komplexitätsreduktion in multivariaten Datenstrukturen.
    16. Lui, Silvia & Mitchell, James & Weale, Martin, 2011. "The utility of expectational data: Firm-level evidence using matched qualitative-quantitative UK surveys," International Journal of Forecasting, Elsevier, vol. 27(4), pages 1128-1146, October.
    17. Oliver Blaskowitz & Helmut Herwartz, 2008. "Testing directional forecast value in the presence of serial correlation," SFB 649 Discussion Papers SFB649DP2008-073, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    18. Jef Vuchelen & Maria-Isabel Gutierrez, 2005. "Do the OECD 24 month horizon growth forecasts for the G7-countries contain information?," Applied Economics, Taylor & Francis Journals, vol. 37(8), pages 855-862.
    19. Mr. Martin Mühleisen & Ms. Kornelia Krajnyak & Mr. Stephan Danninger & Mr. David Hauner & Mr. Bennett W Sutton, 2005. "How Do Canadian Budget Forecasts Compare with Those of Other Industrial Countries?," IMF Working Papers 2005/066, International Monetary Fund.
    20. Sanders, Dwight R. & Manfredo, Mark R., 2003. "USDA Livestock Price Forecasts: A Comprehensive Evaluation," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 28(2), pages 1-19, August.
    21. João Valle e Azevedo & João Tovar Jalles, 2011. "Rational vs. Professional Forecasts," Working Papers w201114, Banco de Portugal, Economics and Research Department.
    22. Stekler, H.O., 2007. "The future of macroeconomic forecasting: Understanding the forecasting process," International Journal of Forecasting, Elsevier, vol. 23(2), pages 237-248.
    23. Sanders, Dwight R. & Manfredo, Mark R. & Boris, Keith, 2008. "Accuracy and efficiency in the U.S. Department of Energy's short-term supply forecasts," Energy Economics, Elsevier, vol. 30(3), pages 1192-1207, May.
    24. Masahiro Ashiya, 2006. "Are 16-month-ahead forecasts useful? A directional analysis of Japanese GDP forecasts," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 25(3), pages 201-207.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:nierwp:0072. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Hegardt Grant (email available below). General contact details of provider: https://edirc.repec.org/data/kongvse.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.