Raiders of the Lost High-Frequency Forecasts: New Data and Evidence on the Efficiency of the Fed's Forecasting

Andrew C. Chang and Trace J. Levinson
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Andrew C. Chang: https://www.federalreserve.gov/econres/andrew-c-chang.htm

No 2020-090, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We introduce a new dataset of real gross domestic product (GDP) growth and core personal consumption expenditures (PCE) inflation forecasts produced by the staff of the Board of Governors of the Federal Reserve System. In contrast to the eight Greenbook forecasts a year the staff produces for Federal Open Market Committee (FOMC) meetings, our dataset has roughly weekly forecasts. We use these new data to study whether the staff forecasts efficiently and whether efficiency, or lack thereof, is time-varying. Prespecified regressions of forecast errors on forecast revisions show that the staff's GDP forecast errors correlate with its GDP forecast revisions, particularly for forecasts made more than two weeks from the start of a FOMC meeting, implying GDP forecasts exhibit time-varying inefficiency between FOMC meetings. We find some weaker evidence for inefficient inflation forecasts.

Keywords: Federal Reserve; Forecast efficiency; Information Rigidities; High frequency forecasts; preanalysis plan; Preregistration plan; Real-time data (search for similar items in EconPapers)
JEL-codes: C53 C82 D79 E27 E37 E58 (search for similar items in EconPapers)
Pages: 56
Date: 2020-10-23
New Economics Papers: this item is included in nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2020-90

DOI: 10.17016/FEDS.2020.090

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