FOMC Forecasts of Macroeconomic Risks

Kevin Dowd ()
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Kevin Dowd: Nottingham University Business School

Occasional Papers from Industrial Economics Division

Abstract: This paper presents a new approach to the evaluation of FOMC macroeconomic forecasts. Its distinctive feature is the interpretation, under reasonable conditions, of the minimum and maximum forecasts reported in FOMC meetings as indicative of probability density forecasts for these variables. This leads to some straightforward binomial tests of the performance of the FOMC forecasts as forecasts of macroeconomic risks. Empirical results suggest that there are serious problems with the FOMC forecasts. Most particularly, there are problems with the FOMC forecasts of the tails of the macroeconomic density functions, including a tendency to under-estimate the tails of macroeconomic risks.

Keywords: Macroeconomic risks; FOMC forecasts; density forecasting (search for similar items in EconPapers)
JEL-codes: C53 E47 E52 (search for similar items in EconPapers)
Pages: pages
Date: 2004, Revised 2004-01-10
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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