Evaluation of the Quality and Success Rate of Forecasts: A Historic Overview
Luboš Růžička and
Jan Vlcek ()
Chapter 7 in Evaluation of the Fulfilment of the CNB's Inflation Targets 1998-2007, 2008, pp 86-101 from Czech National Bank
The paper is aimed at the evaluation of quality and the success-rate of the past Czech National Bankâ€™s forecasts created from 2004 until mid-2006. It strives to identify the factors which have caused deviations from reality in the past forecasts and could contribute to non-fulfilment of the announced inflation target. There are three groups of factors, which have most often contributed to the overvaluation of the historical forecasts: ex post incorrect setting up of the equilibrium trajectories, non-fulfilment of some exogenous presumptions together with an influence of unexpected shocks, and inaccurate capture of some behavioural relationships within the model apparatus. According to a comparison of historical and adjusted forecasts against reality, forecasts produced during the reviewed period of time are diverted on average towards higher inflation, lower real growth, and more depreciated nominal exchange rate. Consistently, the implied trajectory of the interest rate is higher than reality. Nevertheless, the deviations of the basic macro-economic variables gradually decrease with the course of time.
Keywords: Monetary policy; inflation target fulfilment; macroeconomic forecast; forecast deviation; Czech National Bank (search for similar items in EconPapers)
JEL-codes: C60 E17 E37 E58 (search for similar items in EconPapers)
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