Asymmetry in unemployment rate forecast errors

John Galbraith and Simon van Norden ()

International Journal of Forecasting, 2019, vol. 35, issue 4, 1613-1626

Abstract: Asymmetries in unemployment dynamics have been observed in the time series of a number of countries, including the United States. This paper studies asymmetries in unemployment rate forecast errors. We consider conditions under which optimal forecasts will display asymmetrically-distributed errors and how the degree of asymmetry might vary with the forecast horizon. Using data from the U.S. Survey of Professional Forecasters and the Federal Reserve Greenbook, we find substantial evidence of forecast error asymmetry, which tends to increase with the forecast horizon; we also find noteworthy differences in forecasts from these two sources. The results give insight into the abilities of professional forecasters to adapt their forecasts to asymmetry in underlying processes.

Keywords: Asymmetry; Forecast efficiency; Survey of professional forecasters; FOMC; Greenbook; Unemployment rate (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfor:v:35:y:2019:i:4:p:1613-1626

DOI: 10.1016/j.ijforecast.2018.11.006

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