Forecast errors and the macroeconomy — a non-linear relationship?

Ulrich Fritsche and Joerg Doepke ()
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Joerg Doepke: Fachhochschule Merseburg

No 200602, Macroeconomics and Finance Series from University of Hamburg, Department of Socioeconomics

Abstract: The paper analyses reasons for departures from strong rationality of growth and inflation forecasts based on annual observations from 1963 to 2004. We rely on forecasts from the joint forecast of the so-called "six leading" forecasting institutions in Germany and argue that violations of the rationality hypothesis are due to relatively few large forecast errors. These large errors are shown - based on evidence from probit models - to correlate with macroeconomic fundamentals, especially on monetary factors. We test for a non-linear relation between forecast errors and macroeconomic fundamentals and find evidence for such a non-linearity for inflation forecasts.

Keywords: forecast error evaluation; non-linearities; business cycles (search for similar items in EconPapers)
JEL-codes: C52 C53 E32 E37 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2006-02
New Economics Papers: this item is included in nep-ecm, nep-for and nep-mac
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https://www.wiso.uni-hamburg.de/repec/hepdoc/macppr_2_2006.pdf First version, 2006 (application/pdf)

Related works:
Working Paper: Forecast Errors and the Macroeconomy: A Non-Linear Relationship? (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:hep:macppr:200602

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