On the loss structure of federal reserve forecasts of output growth

Hamid Baghestani ()

Journal of Economics and Finance, 2014, vol. 38, issue 3, 518-527

Abstract: Utilizing recent techniques with comparable private forecasts as benchmarks, we test the rationality of the Federal Reserve forecasts of growth under flexible loss. Our findings for 1984–2006 indicate that these forecasts are rational (efficient) and directionally accurate under symmetric loss and are thus of value when similar cost is assigned to both incorrect upward and downward predictions. Over-predictions (under-predictions) are costly when the Fed responds by implementing an unnecessary contractionary (expansionary) monetary policy and thus causes lower growth (higher inflation). Symmetric loss thus indicates that the Fed is equally concerned about both low growth and high inflation. Further results reveal that the private sector closely replicates the Federal Reserve forecasts released to the public with a five-year lag, suggesting that one can utilize the readily available private data as proxies for the not-yet-released Federal Reserve forecasts. Copyright Springer Science+Business Media, LLC 2014

Keywords: Monetary Policy; Greenbook Forecasts; Survey of Professional Forecasters; Directional Accuracy; Symmetric Loss; Asymmetric Information; E32; E37; E58 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1007/s12197-012-9230-2 (text/html)
Access to full text is restricted to subscribers.

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:spr:jecfin:v:38:y:2014:i:3:p:518-527

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/12197/PS2

DOI: 10.1007/s12197-012-9230-2

Access Statistics for this article

Journal of Economics and Finance is currently edited by James Payne

More articles in Journal of Economics and Finance from Springer, Academy of Economics and Finance Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().