Kiel Working Papers, Kiel Institute for World Economics
No 1447:
Are They Really Rational? Assessing Professional Macro-Economic Forecasts from the G7-Countries
Jonas Dovern and Johannes Weisser
Abstract: In this paper, we use survey data to analyze the
rationality of professional macroeconomic forecasts. We analyze both
individual forecasts and average forecasts. We provide evidence on the
properties of forecasts for all the G7-counties and four different
macroeconomic variables. Furthermore, we present a modification to the
structural model which is commonly used to model the forecast errors of
fixed event forecasts in the literature. Our results confirm that average
forecasts should be used with caution, since even if all individual
forecasts are rational the hypothesis of rationality is often rejected by
the aggregate forecasts. We find that there are not only large differences
in the performance of forecasters across countries but also across
different macroeconomic variables; in general, forecasts tend to be biased
in situations where forecasters have to learn about large structural shocks
or gradual changes in the trend of a variable
Keywords: Evaluating forecasts,Macroeconomic Forecasting,Rationality,Survey Data,Fixed-Event Forecasts; (follow links to similar papers)
JEL-Codes: C25,; E32,; E37; (follow links to similar papers)
47 pages, September 2008
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