Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154068
Authors: 
El-Shagi, Makram
Giesen, Sebastian
Jung, Alexander
Year of Publication: 
2014
Series/Report no.: 
ECB Working Paper 1635
Abstract: 
The aim of this paper is to assess whether the findings of Romer and Romer (2000) on the superiority of staff forecasts are still valid today. The paper uses both latest available econometric techniques as well as conventional tests. Several tests for forecast rationality show that a necessary condition for good forecast performance is satisfied both for Greenbook and private forecasts, as measured by the Survey of Professional Forecasters (SPF). Tests for forecast accuracy and the encompassing test confirm the superiority of Greenbook forecasts for inflation and output using an extended sample (1968 to 2006). The relative forecast performance is, however, not robust in the presence of large macroeconomic shocks such as the Great Moderation and oil price shocks. Other econometric tests show that a relative better forecast performance by staff is observed when there is increased uncertainty. Staff’s better knowledge about the Fed’s future interest rate path also plays an important role in this respect.
Subjects: 
forecast performance
forecast rationality
forecast stability
greenbook forecasts
of professional forecasters
survey
JEL: 
C53
E37
E52
E58
Document Type: 
Working Paper

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