IDEAS home Printed from https://ideas.repec.org/p/kie/kieliw/1989.html
   My bibliography  Save this paper

Systematic Errors in Growth Expectations over the Business Cycle

Author

Listed:
  • Jonas Dovern
  • Nils Jannsen

Abstract

Using real-time data, we analyze how the systematic expectation errors of professional forecasters in 19 advanced economies depend on the state of the business cycle. Our results indicate that the general result that forecasters systematically overestimate output growth (across all countries) masks considerable differences across different business-cycle states. We show that forecasts for recessions are subject to a large negative systematic forecast error (forecasters overestimate growth), while forecasts for recoveries are subject to a positive systematic forecast error. Forecasts made for expansions have, if anything, a small systematic forecast error for large forecast horizons. When we link information about the business-cycle state in the target year with quarterly information about its state in the forecasting period, we find that forecasters realize business-cycle turning points somewhat late. Using cross-country evidence, we demonstrate that the positive relationship between a change in trend growth rates and forecast bias, as suggested in the literature, breaks down when only focusing on forecasts made for expansions

Suggested Citation

  • Jonas Dovern & Nils Jannsen, 2015. "Systematic Errors in Growth Expectations over the Business Cycle," Kiel Working Papers 1989, Kiel Institute for the World Economy.
  • Handle: RePEc:kie:kieliw:1989
    as

    Download full text from publisher

    File URL: https://www.ifw-members.ifw-kiel.de/publications/systematic-errors-in-growth-expectations-over-the-business-cycle/systematic-errors-in-growth-expectations-over-the-business-cycle
    Download Restriction: no

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The problem with promises
      by chris in Stumbling and Mumbling on 2015-04-14 18:16:07
    2. Forecasting vs explaining
      by ? in Stumbling and Mumbling on 2015-04-16 19:14:00
    3. The knowledge problem
      by ? in Stumbling and Mumbling on 2015-04-24 18:06:00
    4. Welfare state trade-offs
      by ? in Stumbling and Mumbling on 2015-07-07 17:58:00
    5. In defence of welfare
      by ? in Stumbling and Mumbling on 2015-07-14 18:11:00
    6. Yes, Labour must change
      by ? in Stumbling and Mumbling on 2015-07-24 18:02:00
    7. On centrist utopianism
      by ? in Stumbling and Mumbling on 2015-07-28 18:29:00
    8. Ballroom dancing, & Sapir-Whorf
      by ? in Stumbling and Mumbling on 2015-08-19 18:25:00
    9. Nothing to fear but...
      by ? in Stumbling and Mumbling on 2015-08-25 17:17:00
    10. Inevitable "errors"
      by chris in Stumbling and Mumbling on 2015-09-16 18:54:24
    11. On forecasting recession
      by ? in Stumbling and Mumbling on 2015-10-09 17:39:00
    12. Complexity, & BBC bias
      by ? in Stumbling and Mumbling on 2016-01-25 20:07:00
    13. Are recessions predictable?
      by ? in Stumbling and Mumbling on 2016-02-09 19:59:00
    14. Rational consumers
      by ? in Stumbling and Mumbling on 2016-05-31 17:32:00
    15. In defence of technology shocks
      by chris in Stumbling and Mumbling on 2016-09-20 17:38:32
    16. Why Is Macro So Hard? Bias Against Emergence and Bias Against Understanding
      by Dave in voluntaryXchange on 2019-06-27 18:21:00

    More about this item

    Keywords

    Macroeconomic expectations; forecasting; forecast bias; survey data;

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    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:kie:kieliw:1989. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dieter Stribny). General contact details of provider: http://edirc.repec.org/data/iwkiede.html .

    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.

    We have no references for this item. You can help adding them by using 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.