Geography or skills - What explains Fed watchers’ forecast accuracy of US monetary policy?

Helge Berger (), Michael Ehrmann () and Marcel Fratzscher ()

No 695, Working Paper Series from European Central Bank

Abstract: The paper shows that there is a substantial degree of heterogeneity in forecast accuracy among Fed watchers. Based on a novel database for 268 professional forecasters since 1999, the average forecast error of FOMC decisions varies 5 to 10 basis points between the best and worst-performers across the sample. This heterogeneity is found to be related to both the skills of analysts – such as their educational and employment backgrounds – and to geography. In particular, there is evidence that forecasters located in regions which experience more idiosyncratic economic conditions perform worse in anticipating monetary policy. Moreover, systematic forecaster heterogeneity is economically important as it leads to greater financial market volatility after FOMC meetings. Finally, Fed communication may exert an influence on forecast accuracy. JEL Classification: E52, E58, G14.

Keywords: monetary policy; forecast; Federal Reserve; FOMC; geography; skills; heterogeneity; survey data; communication; United States. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-for, nep-mac and nep-mon
Date: 2006-11
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Related works:
Working Paper: Geography or skills: what explains Fed Wachters' forecast accuracy of US monetary policy? (2008)
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Persistent link: http://EconPapers.repec.org/RePEc:ecb:ecbwps:20060695

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