Economic policy uncertainty and forecast bias in the survey of professional forecasters

Elahe Boskabadi ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper analyzes the properties of forecast bias in the Survey of Professional Forecasters in relation to economic policy uncertainty. Employing the quarterly forecast bias of 14 key macroeconomic variables and 12 measures of policy uncertainty from 1985 to 2020, we demonstrate that most real activity variables have significant negative responses to economic policy uncertainty. On the other hand, there is a substantial degree of sluggishness in the corresponding forecasts, generating long-lasting forecast bias. In other words, our results show that inattentive forecasters cause SPF forecast bias using both static and dynamic frameworks.

Keywords: survey of professional forecasters; forecast bias; Economic policy uncertainty; cross-section dependence (search for similar items in EconPapers)
JEL-codes: C52 E32 E60 (search for similar items in EconPapers)
Date: 2022-10-19
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:115081

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