Has the accuracy of German macroeconomic forecasts improved?

The major focus of this paper is to determine whether the accuracy of German macroeconomic forecasts has improved over time. We examine 1-year-ahead forecasts of real GDP and inflation for 1967 to 2001 made by three major German forecasting groups and the OECD. We examine the accuracy of the forecasts over the entire period and in three sub-periods. We conclude that, with some exceptions, the errors of the German forecasters were similar to those of their US and UK counterparts. While the absolute size of the forecast errors has declined, this is not the case for relative accuracy. A benchmark comparison of these predictions with the ex post forecasts of a macroeconometric model indicates that the quality of the growth forecasts can be improved but that the expected increase in accuracy may not be substantial. --Forecast evaluations,macroeconomic forecasting,accuracy limits

Has the accuracy of German macroeconomic forecasts improved?

The major focus of this paper is to determine whether the accuracy of German macroeconomic forecasts has improved over time. We examine 1-year-ahead forecasts of real GDP and inflation for 1967 to 2001 made by three major German forecasting groups and the OECD. We examine the accuracy of the forecasts over the entire period and in three sub-periods. We conclude that, with some exceptions, the errors of the German forecasters were similar to those of their US and UK counterparts. While the absolute size of the forecast errors has declined, this is not the case for relative accuracy. A benchmark comparison of these predictions with the ex post forecasts of a macroeconometric model indicates that the quality of the growth forecasts can be improved but that the expected increase in accuracy may not be substantial

Information Problems for Policy Analysis and Forecasting

Good information is required for policy analysis and forecasting. This paper reviews the broad range of information problems that face an analyst or forecaster. Two distinct situations are considered: (1) the need to explain the current structure of an economic sector, and (2) the requirement to predict the effects of structural changes. The difficulties considered include data revisions, conflicting results in published studies, publication biases and possibly inappropriate models and theories. Examples considered include computable general equilibrium analyses and forecasts of the effects of airline deregulation.Forecasting; Information

Projecting the Medium-Term: Outcomes and Errors for GDP Growth

The focus of this paper is the evaluation of a very popular method for potential output estimation and medium-term forecasting - the production function approach - in terms of predictive performance. For this purpose, a forecast evaluation for the three to five years ahead predictions of GDP growth for the individual G7 countries is conducted. To carry out the forecast performance check a particular testing framework is derived that allows the computation of robust test statistics given the specific nature of the generated out-of sample forecasts. In addition, medium-term GDP projections from national and international institutions are examined and it is assessed whether these projections convey a reliable view about future economic developments and whether there is scope for improving their predictive content

Strategic Coordination in Forecasting. An Experimental Study

Reputational herding has been considered as a driving force behind economic and financial forecasts clustered around consensus values. Strategic coordination can consequently explain poor performances of prediction markets as resulting from the distinct incentives that forecasters face. While this notion has been considered theoretically and empirically, the underlying behavioral working mechanisms have not yet been described. We thus put forth an exploratory experiment on the emergence and robustness of coordination in a forecasting setting implementing contradictory incentives for accurate forecasts and coordination. Forecasts are shown to be inaccurate and biased toward current values. This in turn has subjects aiming at coordination benefits. Predominantly, coordination is achieved through the risk-dominant equilibrium as the game proceeds. Once established, coordination is fairly stable and adds to overall welfare. Our results support the assumption of rational herding as a driving force for predictions of poor accuracy that are systematically biased towards focal points