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Can the Fed Predict the State of the Economy?

Tara Sinclair, Fred Joutz () and Herman Stekler ()

No 2009-001, Working Papers from The George Washington University, Department of Economics, Research Program on Forecasting

Abstract: Recent research has documented that the Federal Reserve produces systematic errors in forecasting inflation, real GDP growth, and the unemployment rate, even though these forecasts are unbiased. We show that these systematic errors reveal that the Fed is “surprised” by real and inflationary cycles. Using a modified Mincer-Zarnowitz regression, we show that the Fed knows the state of the economy for the current quarter, but cannot predict it one quarter ahead.

Keywords: Forecast Evaluation; Federal Reserve; Systematic Errors; Recessions (search for similar items in EconPapers)
JEL-codes: C53 E37 E52 E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-for and nep-mon
Date: 2009-06, Revised 2010-03
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https://www2.gwu.edu/~forcpgm/2009-001.pdf First version, 2009 (application/pdf)

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Journal Article: Can the Fed predict the state of the economy? (2010) Downloads
Working Paper: Can the Fed Predict the State of the Economy? (2009) Downloads
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