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Professional Forecasts of Interest Rates and Exchange Rates: Evidence from the Wall Street Journal's Panel of Economists

Author

Listed:
  • Karlyn Mitchell

    (Department of Business Management, North Carolina State University)

  • Douglas K. Pearce

    (Department of Economics, North Carolina State University)

Abstract

Recent work on expectations suggests that professional forecasters may have incentives that lead them to make more extreme forecasts than they would make were accuracy the only criterion. We use the interest rate and exchange rate forecasts from the Wall Street Journal?s panel of economists to investigate this issue. We examine the unbiasedness and forecast accuracy of individual forecasters, finding that several forecasters produce biased forecasts and most forecasters cannot out-predict a random walk model. Our tests show evidence of systematic heterogeneity across forecasters and are consistent with independent forecasters making more radical predictions than forecasters from financial institutions.

Suggested Citation

  • Karlyn Mitchell & Douglas K. Pearce, 2004. "Professional Forecasts of Interest Rates and Exchange Rates: Evidence from the Wall Street Journal's Panel of Economists," Working Paper Series 004, North Carolina State University, Department of Economics.
    • Handle: RePEc:ncs:wpaper:004
    Note: First draft 2004-10
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    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications

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