Evaluating Macroeconomic Forecasts: A Concise Review of Some Recent Developments

Macroeconomic forecasts are frequently produced, widely published, intensively discussed and comprehensively used. The formal evaluation of such forecasts has a long research history. Recently, a new angle to the evaluation of forecasts has been addressed, and in this review we analyse some recent d...

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Detalles Bibliográficos
Autores: Franses, Philip Hans, McAleer, Michael, Legerstee, Rianne
Tipo de recurso: informe técnico
Fecha de publicación:2012
País:España
Institución:Universidad Complutense de Madrid (UCM)
Repositorio:Docta Complutense
Idioma:inglés
OAI Identifier:oai:docta.ucm.es:20.500.14352/49093
Acceso en línea:https://hdl.handle.net/20.500.14352/49093
Access Level:acceso abierto
Palabra clave:Macroeconomic forecasts
Econometric models
Human intuition
Biased forecasts
Forecast performance
Forecast evaluation
Forecast comparison.
Econometría (Economía)
Macroeconomía
5302 Econometría
5307.14 Teoría Macroeconómica
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spelling Evaluating Macroeconomic Forecasts: A Concise Review of Some Recent DevelopmentsFranses, Philip HansMcAleer, MichaelLegerstee, RianneMacroeconomic forecastsEconometric modelsHuman intuitionBiased forecastsForecast performanceForecast evaluationForecast comparison.Econometría (Economía)Macroeconomía5302 Econometría5307.14 Teoría MacroeconómicaMacroeconomic forecasts are frequently produced, widely published, intensively discussed and comprehensively used. The formal evaluation of such forecasts has a long research history. Recently, a new angle to the evaluation of forecasts has been addressed, and in this review we analyse some recent developments from that perspective. The literature on forecast evaluation predominantly assumes that macroeconomic forecasts are generated from econometric models. In practice, however, most macroeconomic forecasts, such as those from the IMF, World Bank, OECD, Federal Reserve Board, Federal Open Market Committee (FOMC) and the ECB, are typically based on econometric model forecasts jointly with human intuition. This seemingly inevitable combination renders most of these forecasts biased and, as such, their evaluation becomes non-standard. In this review, we consider the evaluation of two forecasts in which: (i) the two forecasts are generated from two distinct econometric models; (ii) one forecast is generated from an econometric model and the other is obtained as a combination of a model and intuition; and (iii) the two forecasts are generated from two distinct (but unknown) combinations of different models and intuition. It is shown that alternative tools are needed to compare and evaluate the forecasts in each of these three situations. These alternative techniques are illustrated by comparing the forecasts from the (econometric) Staff of the Federal Reserve Board and the FOMC on inflation, unemployment and real GDP growth. It is shown that the FOMC does not forecast significantly better than the Staff, and that the intuition of the FOMC does not add significantly in forecasting the actual values of the economic fundamentals. This would seem to belie the purported expertise of the FOMC.Universidad Complutense de Madrid20122012-06-0120122012-06-01technical reporthttp://purl.org/coar/resource_type/c_18ghinfo:eu-repo/semantics/reportapplication/pdfhttps://hdl.handle.net/20.500.14352/49093reponame:Docta Complutenseinstname:Universidad Complutense de Madrid (UCM)Inglésengopen accesshttp://purl.org/coar/access_right/c_abf2Atribución-NoComercial 3.0 Españahttps://creativecommons.org/licenses/by-nc/3.0/es/info:eu-repo/semantics/openAccessoai:docta.ucm.es:20.500.14352/490932026-06-02T12:44:21Z
dc.title.none.fl_str_mv Evaluating Macroeconomic Forecasts: A Concise Review of Some Recent Developments
title Evaluating Macroeconomic Forecasts: A Concise Review of Some Recent Developments
spellingShingle Evaluating Macroeconomic Forecasts: A Concise Review of Some Recent Developments
Franses, Philip Hans
Macroeconomic forecasts
Econometric models
Human intuition
Biased forecasts
Forecast performance
Forecast evaluation
Forecast comparison.
Econometría (Economía)
Macroeconomía
5302 Econometría
5307.14 Teoría Macroeconómica
title_short Evaluating Macroeconomic Forecasts: A Concise Review of Some Recent Developments
title_full Evaluating Macroeconomic Forecasts: A Concise Review of Some Recent Developments
title_fullStr Evaluating Macroeconomic Forecasts: A Concise Review of Some Recent Developments
title_full_unstemmed Evaluating Macroeconomic Forecasts: A Concise Review of Some Recent Developments
title_sort Evaluating Macroeconomic Forecasts: A Concise Review of Some Recent Developments
dc.creator.none.fl_str_mv Franses, Philip Hans
McAleer, Michael
Legerstee, Rianne
author Franses, Philip Hans
author_facet Franses, Philip Hans
McAleer, Michael
Legerstee, Rianne
author_role author
author2 McAleer, Michael
Legerstee, Rianne
author2_role author
author
dc.contributor.none.fl_str_mv Universidad Complutense de Madrid
dc.subject.none.fl_str_mv Macroeconomic forecasts
Econometric models
Human intuition
Biased forecasts
Forecast performance
Forecast evaluation
Forecast comparison.
Econometría (Economía)
Macroeconomía
5302 Econometría
5307.14 Teoría Macroeconómica
topic Macroeconomic forecasts
Econometric models
Human intuition
Biased forecasts
Forecast performance
Forecast evaluation
Forecast comparison.
Econometría (Economía)
Macroeconomía
5302 Econometría
5307.14 Teoría Macroeconómica
description Macroeconomic forecasts are frequently produced, widely published, intensively discussed and comprehensively used. The formal evaluation of such forecasts has a long research history. Recently, a new angle to the evaluation of forecasts has been addressed, and in this review we analyse some recent developments from that perspective. The literature on forecast evaluation predominantly assumes that macroeconomic forecasts are generated from econometric models. In practice, however, most macroeconomic forecasts, such as those from the IMF, World Bank, OECD, Federal Reserve Board, Federal Open Market Committee (FOMC) and the ECB, are typically based on econometric model forecasts jointly with human intuition. This seemingly inevitable combination renders most of these forecasts biased and, as such, their evaluation becomes non-standard. In this review, we consider the evaluation of two forecasts in which: (i) the two forecasts are generated from two distinct econometric models; (ii) one forecast is generated from an econometric model and the other is obtained as a combination of a model and intuition; and (iii) the two forecasts are generated from two distinct (but unknown) combinations of different models and intuition. It is shown that alternative tools are needed to compare and evaluate the forecasts in each of these three situations. These alternative techniques are illustrated by comparing the forecasts from the (econometric) Staff of the Federal Reserve Board and the FOMC on inflation, unemployment and real GDP growth. It is shown that the FOMC does not forecast significantly better than the Staff, and that the intuition of the FOMC does not add significantly in forecasting the actual values of the economic fundamentals. This would seem to belie the purported expertise of the FOMC.
publishDate 2012
dc.date.none.fl_str_mv 2012
2012-06-01
2012
2012-06-01
dc.type.none.fl_str_mv technical report
http://purl.org/coar/resource_type/c_18gh
dc.type.openaire.fl_str_mv info:eu-repo/semantics/report
format report
dc.identifier.none.fl_str_mv https://hdl.handle.net/20.500.14352/49093
url https://hdl.handle.net/20.500.14352/49093
dc.language.none.fl_str_mv Inglés
eng
language_invalid_str_mv Inglés
language eng
dc.rights.none.fl_str_mv open access
http://purl.org/coar/access_right/c_abf2
Atribución-NoComercial 3.0 España
https://creativecommons.org/licenses/by-nc/3.0/es/
dc.rights.openaire.fl_str_mv info:eu-repo/semantics/openAccess
rights_invalid_str_mv open access
http://purl.org/coar/access_right/c_abf2
Atribución-NoComercial 3.0 España
https://creativecommons.org/licenses/by-nc/3.0/es/
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.source.none.fl_str_mv reponame:Docta Complutense
instname:Universidad Complutense de Madrid (UCM)
instname_str Universidad Complutense de Madrid (UCM)
reponame_str Docta Complutense
collection Docta Complutense
repository.name.fl_str_mv
repository.mail.fl_str_mv
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score 15.812429

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