Asymmetric Loss in the Greenbook and the Survey of Professional Forecasters

Tae Hwy Lee and Yiyao Wang ()
Additional contact information
Yiyao Wang: Booth School of Business, the University of Chicago

No 201407, Working Papers from University of California at Riverside, Department of Economics

Abstract: This paper examines forecast rationality of the Greenbook and the Survey of Professional Forecasters (SPF) under asymmetric loss functions, using the method proposed by Elliott, Komunjer and Timmermann (2005) with a rolling window strategy. Over rolling periods, the degree and direction of asymmetry in forecast loss function are time-varying. While rationality under symmetric loss is often rejected, forecast rationality under asymmetric loss is not rejected over nearly all rolling periods. Besides, real output growth is consistently under-predicted in 1990s and inflation rate is consistently over-predicted in 1980s and 1990s. Generally, inflation forecast, especially for long horizon, exhibits greater level of loss asymmetry in magnitude and frequency. The loss asymmetry of real output growth forecast is more pronounced when the last revised vintage data is used rather than real-time vintage is used. All of these results similarly hold in Greenbook and SPF. The results are also similar with different sets of instrumental variables for estimation of the asymmetric loss and for forecast rationality test.

Keywords: Greenbook; SPF; Asymmetric loss; Forecast rationality; Real output growth forecast; Inflation rate forecast; Real time data; Revised data. (search for similar items in EconPapers)
JEL-codes: C53 E37 (search for similar items in EconPapers)
Pages: 20 Pages
Date: 2014-09
New Economics Papers: this item is included in nep-for, nep-ger and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

Published in International Journal of Forecasting 30(2): 235-245. 2014.

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https://economics.ucr.edu/repec/ucr/wpaper/201407.pdf First version, 2014 (application/pdf)

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Journal Article: Asymmetric loss in the Greenbook and the Survey of Professional Forecasters (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ucr:wpaper:201407

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