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Are Forecast Updates Progressive?

Chia-Lin Chang (), Philip Hans Franses and Michael McAleer

Working Papers in Economics from University of Canterbury, Department of Economics and Finance

Abstract: Macro-economic forecasts typically involve both a model component, which is replicable, as well as intuition, which is non-replicable. Intuition is expert knowledge possessed by a forecaster. If forecast updates are progressive, forecast updates should become more accurate, on average, as the actual value is approached. Otherwise, forecast updates would be neutral. The paper proposes a methodology to test whether forecast updates are progressive and whether econometric models are useful in updating forecasts. The data set for the empirical analysis are for Taiwan, where we have three decades of quarterly data available of forecasts and updates of the inflation rate and real GDP growth rate. The actual series for both the inflation rate and the real GDP growth rate are always released by the government one quarter after the release of the revised forecast, and the actual values are not revised after they have been released. Our empirical results suggest that the forecast updates for Taiwan are progressive, and can be explained predominantly by intuition. Additionally, the one-, two- and three-quarter forecast errors are predictable using publicly available information for both the inflation rate and real GDP growth rate, which suggests that the forecasts can be improved.

Keywords: Macro-economic forecasts; econometric models; intuition; initial forecast; primary forecast; revised forecast; actual value; progressive forecast updates; forecast errors (search for similar items in EconPapers)
JEL-codes: C53 C22 E27 E37 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-ets and nep-for
Date: 2010-04-01
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Downloads: (external link)
http://www.econ.canterbury.ac.nz/RePEc/cbt/econwp/1012.pdf (application/pdf)

Related works:
Journal Article: Are forecast updates progressive? (2013) Downloads
Working Paper: Are Forecast Updates Progressive? (2013) Downloads
Working Paper: Are Forecast Updates Progressive? (2013) Downloads
Working Paper: Are Forecast Updates Progressive? (2011) Downloads
Working Paper: Are Forecast Updates Progressive? (2011) Downloads
Working Paper: Are Forecast Updates Progressive? (2010) Downloads
Working Paper: Are Forecast Updates Progressive? (2010) Downloads
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