Does the FOMC Have Expertise, and Can It Forecast?
The primary purpose of the paper is to answer the following two questions regarding the performance of the influential Federal Open Market Committee (FOMC) of the Federal Reserve System, in comparison with the forecasts contained in the "Greenbooks" of the professional staff of the Board of Governors: Does the FOMC have expertise, and can it forecast better than the staff? The FOMC forecasts that are analyzed in practice are nonreplicable forecasts. In order to evaluate such forecasts, this paper develops a model to generate replicable FOMC forecasts, and compares the staff forecasts, non-replicable FOMC forecasts, and replicable FOMC forecasts, considers optimal forecasts and efficient estimation methods, and presents a direct test of FOMC expertise on nonreplicable FOMC forecasts. The empirical analysis of Romer and Romer (2008) is reexamined to evaluate whether their criticisms of the FOMC's forecasting performance should be accepted unreservedly, or might be open to alternative interpretations.
|Date of creation:||Aug 2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.cirje.e.u-tokyo.ac.jp/index.htmlEmail:
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fiebig, Denzil G. & McAleer, Michael & Bartels, Robert, 1992. "Properties of ordinary least squares estimators in regression models with nonspherical disturbances," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 321-334.
- McAleer, Michael, 1995. "The significance of testing empirical non-nested models," Journal of Econometrics, Elsevier, vol. 67(1), pages 149-171, May.
- Christina D. Romer & David H. Romer, 2003.
"A New Measure of Monetary Shocks: Derivation and Implications,"
NBER Working Papers
9866, National Bureau of Economic Research, Inc.
- Christina D. Romer & David H. Romer, 2004. "A New Measure of Monetary Shocks: Derivation and Implications," American Economic Review, American Economic Association, vol. 94(4), pages 1055-1084, September.
- Philip Hans Franses & Michael McAleer & Rianne Legerstee, 2009.
"Expert opinion versus expertise in forecasting,"
Netherlands Society for Statistics and Operations Research, vol. 63(3), pages 334-346.
- McAleer, Michael, 1992. "Efficient Estimation: The Rao-Zyskind Condition, Kruskal's Theorem and Ordinary Least Squares," The Economic Record, The Economic Society of Australia, vol. 68(200), pages 65-72, March.
When requesting a correction, please mention this item's handle: RePEc:tky:fseres:2009cf648. 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: (CIRJE administrative office)
If references are entirely missing, you can add them using this form.