Are they really rational? Assessing professional macro-economic forecasts from the G7-countries

Jonas Dovern and Johannes Weisser

No 1447, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: In this paper, we use survey data to analyze the rationality of professional macroeconomic forecasts. We analyze both individual forecasts and average forecasts. We provide evidence on the properties of forecasts for all the G7-counties and four different macroeconomic variables. Furthermore, we present a modification to the structural model which is commonly used to model the forecast errors of fixed event forecasts in the literature. Our results confirm that average forecasts should be used with caution, since even if all individual forecasts are rational the hypothesis of rationality is often rejected by the aggregate forecasts. We find that there are not only large differences in the performance of forecasters across countries but also across different macroeconomic variables; in general, forecasts tend to be biased in situations where forecasters have to learn about large structural shocks or gradual changes in the trend of a variable.

Keywords: Evaluating forecasts; macroeconomic forecasting; rationality; survey data; fixed-event forecasts (search for similar items in EconPapers)
JEL-codes: C25 E32 E37 (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1447

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