How Accurate are Government Forecasts of Economic Fundamentals? The Case of Taiwan

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

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

Abstract: A government’s ability to forecast key economic fundamentals accurately can affect business confidence, consumer sentiment, and foreign direct investment, among others. A government forecast based on an econometric model is replicable, whereas one that is not fully based on an econometric model is non-replicable. Governments typically provide non-replicable forecasts (or, expert forecasts) of economic fundamentals, such as the inflation rate and real GDP growth rate. In this paper, we develop a methodology to evaluate non-replicable forecasts. We argue that in order to do so, one needs to retrieve from the non-replicable forecast its replicable component, and that it is the difference in accuracy between these two that matters. An empirical example to forecast economic fundamentals for Taiwan shows the relevance of the proposed methodological approach. Our main finding is that it is the undocumented knowledge of the Taiwanese government that reduces forecast errors substantially.

Keywords: Government forecasts; generated regressors; replicable government forecasts; non- replicable government forecasts; initial forecasts; revised forecasts (search for similar items in EconPapers)
JEL-codes: C22 C53 E27 E37 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2010-04-01
New Economics Papers: this item is included in nep-for and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
https://repec.canterbury.ac.nz/cbt/econwp/1016.pdf (application/pdf)

Related works:
Journal Article: How accurate are government forecasts of economic fundamentals? The case of Taiwan (2011)
Working Paper: How Accurate are Government Forecasts of Economic Fundamentals? The Case of Taiwan (2010)
Working Paper: How Accurate are Government Forecasts of Economic Fundamentals? The Case of Taiwan (2009)
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:cbt:econwp:10/16

Access Statistics for this paper

More papers in Working Papers in Economics from University of Canterbury, Department of Economics and Finance Private Bag 4800, Christchurch, New Zealand. Contact information at EDIRC.
Bibliographic data for series maintained by Albert Yee ().