Do Fed Forecast Errors Matter?

Pao‐Lin Tien, Tara Sinclair and Edward N. Gamber

Oxford Bulletin of Economics and Statistics, 2021, vol. 83, issue 3, 686-712

Abstract: In order to make forward‐looking policy decisions, the Fed relies on imperfect forecasts of future macroeconomic conditions. If the Fed’s forecasts are rational, then the difference between the actual outcome and the Fed’s forecast is exogenous to the information set of the Fed at the time the forecast was produced. We investigate the effect of the Fed’s forecast errors on output and price movements under the assumption that the Fed intends to implement policy through a forward‐looking Taylor rule with perfect foresight. Our results suggest that although the mean absolute magnitude of the Fed’s forecast errors is large, the impact on the macroeconomy is reassuringly small, although the impact is larger when we take into consideration the Fed’s inability to forecast recessions.

Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://doi.org/10.1111/obes.12415

Related works:
Working Paper: Do Fed Forecast Errors Matter? (2018)
Working Paper: Do Fed forecast errors matter? (2016)
Working Paper: Do Fed Forecast Errors Matter? (2016)
Working Paper: Do Fed Forecast Errors Matter? (2015)
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:bla:obuest:v:83:y:2021:i:3:p:686-712

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0305-9049

Access Statistics for this article

Oxford Bulletin of Economics and Statistics is currently edited by Christopher Adam, Anindya Banerjee, Christopher Bowdler, David Hendry, Adriaan Kalwij, John Knight and Jonathan Temple

More articles in Oxford Bulletin of Economics and Statistics from Department of Economics, University of Oxford Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().