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Forecasters’ Disagreement about How the Economy Operates, and the Role of Long-run Relationships


  • Michael Clements

    () (ICMA Centre, Henley Business School, University of Reading,)


Macro-variables such as consumption, investment and output are expected to move together in the long run. We consider whether survey forecasts of these quantities suggest beliefs about equilibrium relationships play a prominent role in expectations formation. Evidence is brought to bear from an analysis of multivariate measures of forecaster disagreement, as well as tests of forecast optimality. The analysis of disagreement provides little support for the proposition that equilibrium considerations play a key role. Moreover, we generally reject forecast optimality for a majority of forecasters, but there is no evidence that this is due to long-run mis-specifcation.

Suggested Citation

  • Michael Clements, 2015. "Forecasters’ Disagreement about How the Economy Operates, and the Role of Long-run Relationships," ICMA Centre Discussion Papers in Finance icma-dp2015-09, Henley Business School, Reading University.
  • Handle: RePEc:rdg:icmadp:icma-dp2015-09

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    More about this item


    Expectations formation; Equilibrium; Multivariate Disagreement.;

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods


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