Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153129
Authors: 
Berger, Helge
Ehrmann, Michael
Fratzscher, Marcel
Year of Publication: 
2006
Series/Report no.: 
ECB Working Paper 695
Abstract: 
The paper shows that there is a substantial degree of heterogeneity in forecast accuracy among Fed watchers. Based on a novel database for 268 professional forecasters since 1999, the average forecast error of FOMC decisions varies 5 to 10 basis points between the best and worst-performers across the sample. This heterogeneity is found to be related to both the skills of analysts – such as their educational and employment backgrounds – and to geography. In particular, there is evidence that forecasters located in regions which experience more idiosyncratic economic conditions perform worse in anticipating monetary policy. Moreover, systematic forecaster heterogeneity is economically important as it leads to greater financial market volatility after FOMC meetings. Finally, Fed communication may exert an influence on forecast accuracy.
Subjects: 
communication
Federal Reserve
FOMC
forecast
geography
heterogeneity
monetary policy
skills
survey data
United States
JEL: 
E52
E58
G14
Document Type: 
Working Paper

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