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How Far Ahead Can We Forecast? Evidence From Cross-country Surveys

  • Kajal Lahiri
  • Gultekin Isiklar

Using monthly GDP forecasts from Consensus Economics Inc. for 18 developed countries reported over 24 different forecast horizons during 1989-2004, we find that the survey forecasts do not have much value when the horizon goes beyond 18 months. Using two alternative approaches to measure the flow of new information in fixed-target survey forecasts, we found that the biggest improvement in forecasting performance comes when the forecast horizon is around 14 months. The dynamics of information accumulation over forecast horizons can provide both the forecasters and their clients with an important clue in their selection of the timing and frequency in the use of forecasting services. The limits to forecasting that these private market forecasters exhibit are indicative of the current state of macroeconomic foresight.

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File URL: http://www.albany.edu/economics/research/workingp/2006/How%20far%20ahead%20can%20we%20forecast.pdf
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Paper provided by University at Albany, SUNY, Department of Economics in its series Discussion Papers with number 06-04.

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Date of creation: 2006
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Handle: RePEc:nya:albaec:06-04
Contact details of provider: Postal: Department of Economics, BA 110 University at Albany State University of New York Albany, NY 12222 U.S.A.
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Order Information: Postal: Department of Economics, BA 110 University at Albany State University of New York Albany, NY 12222 U.S.A.
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