Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/56551
Authors: 
Tillmann, Peter
Year of Publication: 
2011
Series/Report no.: 
Joint discussion paper series in economics 28-2011
Abstract: 
This paper investigates how FOMC members revise their forecasts for key macroeconomic variables. Based on a new data set of forecasts from individual FOMC members between 1992 and 2000 it is shown that FOMC members intentionally overrevise their forecasts at the first revision and underrevise at the final revision date. This pattern of rationally biased forecasts is similar to that of private sector forecasters and is consistent with theories of reputation building among forecasters. The FOMC's shift towards more transparency in 1994 had an impact on how members revised their forecasts and intensified the tendency to underrevise at the later stage of the forecasting process. The tendency to underrevise, i.e. to smooth forecast revisions, is particularly strong for nonvoting members of the committee.
Subjects: 
biased forecasts
reputation
forecast errors
monetary policy
transparency
Federal Reserve
JEL: 
E43
E52
Document Type: 
Working Paper

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