Evaluating Federal Reserve predictions of growth in consumer spending

Hamid Baghestani

Applied Economics, 2013, vol. 45, issue 13, 1637-1646

Abstract: This study shows that Federal Reserve forecasts of growth in both total consumption and durable spending are generally rational under asymmetric loss, and the forecasts of growth in nondurable (services) spending, while unbiased (biased), fail to be rational. Yet, these forecasts are all directionally accurate. The forecasts of growth in total consumption, durable and services spending are more (less) accurate in predicting the downward (upward) moves and are thus of value when policymakers assign more (less) cost to incorrect downward (upward) predictions. The forecasts of growth in nondurable spending are equally accurate in predicting the downward and upward moves and are thus of value when policymakers assign similar cost to both incorrect downward and upward predictions. Utilizing survey data to measure the private forecasts, we further provide partial support for the asymmetric information hypothesis that the Federal Reserve has useful information about the state of the economy that is not known by the public.

Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2011.633893 (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:taf:applec:45:y:2013:i:13:p:1637-1646

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2011.633893

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().