Forecast Rationality Tests in the Presence of Instabilities, With Applications to Federal Reserve and Survey Forecasts

Barbara Rossi

No 765, Working Papers from Barcelona School of Economics

Abstract: This paper proposes a framework to implement regression-based tests of predictive ability in unstable environments, including, in particular, forecast unbiasedness and efficiency tests, commonly referred to as tests of forecast rationality. Our framework is general: it can be applied to model-based forecasts obtained either with recursive or rolling window estimation schemes, as well as to forecasts that are model-free. The proposed tests provide more evidence against forecast rationality than previously found in the Federal Reserve's Greenbook forecasts as well as survey-based private forecasts. It confirms, however, that the Federal Reserve has additional information about current and future states of the economy relative to market participants.

Keywords: forecasting; forecast rationality; regression-based tests of forecasting ability; Greenbook forecasts; survey forecasts; real-time data (search for similar items in EconPapers)
JEL-codes: C22 C52 C53 (search for similar items in EconPapers)
Date: 2015-09
New Economics Papers: this item is included in nep-for
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Forecast Rationality Tests in the Presence of Instabilities, with Applications to Federal Reserve and Survey Forecasts (2016)
Working Paper: Forecast Rationality Tests in the Presence of Instabilities, With Applications to Federal Reserve and Survey Forecasts (2016)
Working Paper: Forecast rationality tests in the presence of instabilities, with applications to Federal Reserve and survey forecasts (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:bge:wpaper:765

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