Evaluating the forecast quality of GDP components: An application to G7

Paulo Júlio and Pedro Esperança ()

No 47, GEE Papers from Gabinete de Estratégia e Estudos, Ministério da Economia

Abstract: We evaluate the quality of OECD's and IMF's forecasts for real GDP growth and for GDP expenditure components. We use a scaled statistic to compare the prediction models' performance across GDP components with different volatilities and decompose the GDP forecast error into the corresponding component contributions. Moreover, we use two recently proposed statistics - Mean of Total Weighted Absolute Error and Mean of Total Weighted Squared Error - to evaluate the overall accuracy of component predictions. We conclude that overpredictions in investment and net exports explain GDP overpredictions at 1-year horizons. Accurate GDP forecasts for same-year predictions are mostly explained by canceling out effects in component prediction errors - mainly in exports and imports - rather than by accurate component predictions. We also show that forecasts are in general inefficient for both GDP and its components and that the 2008 crisis had a large negative effect on the quality of forecasts being issued, but not on the predictive quality of forecast models.

Keywords: Forecast evaluation; GDP expenditure components; Mean of total weighted absolute error; Mean of total weighted squared error; G7; 2008 crisis (search for similar items in EconPapers)
JEL-codes: C52 C53 E37 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2012-04, Revised 2012-04
New Economics Papers: this item is included in nep-for
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.gee.gov.pt/RePEc/WorkingPapers/GEE_PAPERS_47.pdf First version, 2012 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mde:wpaper:0047

Access Statistics for this paper

More papers in GEE Papers from Gabinete de Estratégia e Estudos, Ministério da Economia Contact information at EDIRC.
Bibliographic data for series maintained by Joana Almodovar ().