The diversity of forecasts from macroeconomic models of the U.S. economy

This paper investigates the accuracy and heterogeneity of output growth and inflation forecasts during the current and the four preceding NBER-dated U.S. recessions. We generate forecasts from six different models of the
This paper investigates the accuracy and heterogeneity of output growth and inflation forecasts during the current and the four preceding NBER-dated U.S. recessions. We generate forecasts from six different models of the U.S. economy and compare them to professional forecasts from the Federal Reserve’s Greenbook and the Survey of Professional Forecasters (SPF). The model parameters and model forecasts are derived from historical data vintages so as to ensure comparability to historical forecasts by professionals. The mean model forecast comes surprisingly close to the mean SPF and Greenbook forecasts in terms of accuracy even though the models only make use of a small number of data series. Model forecasts compare particularly well to professional forecasts at a horizon of three to four quarters and during recoveries. The extent of forecast heterogeneity is similar for model and professional forecasts but varies substantially over time. Thus, forecast heterogeneity constitutes a potentially important source of economic fluctuations. While the particular reasons for diversity in professional forecasts are not observable, the diversity in model forecasts can be traced to different modeling assumptions, information sets and parameter estimates. JEL Classification: C53, D84, E31, E32, E37 Keywords: Forecasting, Business Cycles, Heterogeneous Beliefs, Forecast Distribution, Model Uncertainty, Bayesian Estimation
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Metadaten
Author:Volker Wieland, Maik Hendrik Wolters
URN:urn:nbn:de:hebis:30-78618
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2010,08
Series (Serial Number):CFS working paper series (2010, 08)
Document Type:Working Paper
Language:English
Year of Completion:2010
Year of first Publication:2010
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2010/08/19
Tag:Bayesian Estimation; Business Cycles; Forecast Distribution; Forecasting; Heterogeneous Beliefs; Model Uncertainty
SWD-Keyword:Geduld; Gleichgewicht; Verbraucher; Versicherungsmarkt
Issue:May 20, 2010
Pagenumber:52
HeBIS PPN:226429776
Institutes:Center for Financial Studies (CFS)
Dewey Decimal Classification:330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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