Can the Fed Predict the State of the Economy?

Tara Sinclair and Fred Joutz

Working Papers from The George Washington University, Institute for International Economic Policy

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)
Pages: 12 pages
Date: 2009-06
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Related works:
Journal Article: Can the Fed predict the state of the economy? (2010)
Working Paper: Can the Fed Predict the State of the Economy? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:gwi:wpaper:2008-06

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