Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/232407 
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8810
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
Abstract: 
We have argued that from the standpoint of a policy maker who has access to a number of expert forecasts, the uncertainty of a combined forecast should be interpreted as that of a typical forecaster randomly drawn from the pool. With a standard factor decomposition of a panel of forecasts, we show that the uncertainty of a typical forecaster can be expressed as the disagreement among the forecasters plus the volatility of the common shock. Using new statistics to test for the homogeneity of idiosyncratic errors under the joint limits with both T and n approaching infinity simultaneously, we find that some previously used measures significantly underestimate the conceptually correct benchmark forecast uncertainty.
Subjects: 
disagreement
forecast combination
panel data
uncertainty
JEL: 
C12
C33
E37
Document Type: 
Working Paper
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