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Forecast performance in times terrorism

Jonathan Benchimol and Makram El-Shagi

Economic Modelling, 2020, vol. 91, issue C, 386-402

Abstract: Governments, central banks, and private companies make extensive use of expert and market-based forecasts in their decision-making processes. These forecasts can be affected by terrorism, a factor that should be considered by decision-makers. We focus on terrorism as a mostly endogenously driven form of political uncertainty and assess the forecasting performance of market-based and professional inflation and exchange rate forecasts in Israel. We show that expert forecasts are better than market-based forecasts, particularly during periods of terrorism. However, the performance of both market-based and expert forecasts is significantly worse during such periods. Thus, policymakers should be particularly attentive to terrorism when considering inflation and exchange rate forecasts.

Keywords: Inflation; Exchange rate; Forecast performance; Terrorism; Market forecast; Expert forecast (search for similar items in EconPapers)
JEL-codes: C53 E37 F37 F51 (search for similar items in EconPapers)
Date: 2020
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Related works:
Working Paper: Forecast Performance in Times of Terrorism (2020) Downloads
Working Paper: Forecast performance in times of terrorism (2020)
Working Paper: Forecast Performance in Times of Terrorism (2019) Downloads
Working Paper: Forecast Performance in Times of Terrorism (2017) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:91:y:2020:i:c:p:386-402

DOI: 10.1016/j.econmod.2020.05.018

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