An evaluation of the predictions of the Federal Reserve

Joutz, Fred; Stekler, H. O.

doi:10.1016/s0169-2070(99)00046-1

Cited by 102 publications

(73 citation statements)

References 15 publications

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“…We follow Joutz and Stekler (2000) in treating the forecasts made during the first few days of a quarter as belonging to the previous quarter, because little information would have accrued. Joutz and Stekler (2000) analyse the relationships between the forecasts made at various times during the months. They find that forecasts made later in the quarter are more accurate for forecasts of the current quarter, but not subsequent quarters.…”

Section: Data Set and Resultsmentioning

confidence: 99%

“…Scotese (1994) found no significant biases in either the real GNP or inflation forecasts, but she noted that the forecast revisions had been smoothed. The studies by Kishnan (1996, 1999) and Joutz and Stekler (2000) all showed that the inflation forecasts were unbiased but that there was a question whether the real GDP predictions were also unbiased. The Romer and Romer (2000) and Sims (2002) studies were primarily concerned with the accuracy of the Fed's inflation forecasts.…”

Section: Introductionmentioning

confidence: 99%

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An evaluation of the forecasts of the federal reserve: a pooled approach

Clements

Joutz

Stekler

2007

J of Applied Econometrics

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The Federal Reserve Greenbook forecasts of real GDP, inflation and unemployment are analysed for the period 1974 to 1997. We consider whether these forecasts exhibit systematic bias, and whether efficient use is made of information, that is, whether revisions to these forecasts over time are predictable. Rather than analyse the forecasts separately for each horizon of interest, we discuss and implement methods that pool information over horizons.We conclude that there is evidence of systematic bias and of forecast smoothing of the inflation forecasts. JEL classification numbers: C12, C53.

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Section: Data Set and Resultsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

An evaluation of the forecasts of the federal reserve: a pooled approach

Clements

Joutz

Stekler

2007

J of Applied Econometrics

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“…These results suggest that systematic errors can exist in the forecasts (as found by Joutz and Stekler, 2000), but they may offset each other over the business cycle. Because knowledge about the state of the economy is important for setting monetary policy, the Fed's inability to forecast it one quarter ahead is disconcerting.…”

Section: Implications and Conclusionmentioning

confidence: 57%

“…Recent research has shown that the Fed forecasts contain systematic errors (Joutz and Stekler, 2000). Forecasters overestimated the rate of growth during slowdowns and recessions and underestimated it during recoveries and booms.…”

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confidence: 99%

Can the Fed Predict the State of the Economy?

2010

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Recent research has documented that the Federal Reserve produces systematic errors in forecasting inflation, real GDP growth, and the unemployment rate, even though these forecasts are unbiased. We show that these systematic errors reveal that the Fed is "surprised" by real and inflationary cycles. Using a modified Mincer-Zarnowitz regression, we show that the Fed knows the state of the economy for the current quarter, but cannot predict it one quarter ahead. We further show that even allowing for an asymmetric loss function the Fed does not appear to know the state of the economy one quarter ahead.

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“…For example, the staff of the Board of Governors of the Federal Reserve prepare forecasts for the meetings of the Open Market Committee. These meetings occur several times each quarter: see Karamouzis and Lombra (1989) and Joutz and Stekler (2000). Therefore, monthly data pertaining to the first part of the quarter will sometimes be available for forecasts made later in the quarter.…”

Section: Forecasting With Information Inside the Quartermentioning

confidence: 99%

Macroeconomic Forecasting with Mixed Frequency Data: Forecasting US Output Growth and Inflation

2006

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Although many macroeconomic series such as US real output growth are sampled quarterly, many potentially useful predictors are observed at a higher frequency. We look at whether a recently developed mixed data-frequency sampling (MIDAS) approach can improve forecasts of output growth and inflation. We carry out a number of related real-time forecast comparisons using various indicators as explanatory variables. We find that MIDAS model forecasts of output growth are more accurate at horizons less than one quarter using coincident indicators; that MIDAS models are an effective way of combining information from multiple indicators;and that the forecast accuracy of the unemployment-rate Phillips curve for inflation is enhanced using the MIDAS approach.Keywords: Data frequency, multiple predictors, combination, real-time forecasting.JEL classification: C51, C53. * We are grateful to the Editor, an Associate Editor, and two anonymous referees for helpful comments and guidance. We also acknowledge helpful comments from participants at the International Symposium of Forecasting Macroeconomic Forecasting with Mixed Frequency Data:Forecasting US output growth and inflation AbstractAlthough many macroeconomic series such as US real output growth are sampled quarterly, many potentially useful predictors are observed at a higher frequency. We look at whether a recently developed mixed data-frequency sampling (MIDAS) approach can improve forecasts of output growth and inflation. We carry out a number of related real-time forecast comparisons using various indicators as explanatory variables. We find that MIDAS model forecasts of output growth are more accurate at horizons less than one quarter using coincident indicators; that MIDAS models are an effective way of combining information from multiple indicators; and that the forecast accuracy of the unemployment-rate Phillips curve for inflation is enhanced using the MIDAS approach.

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An evaluation of the predictions of the Federal Reserve

Cited by 102 publications

References 15 publications

An evaluation of the forecasts of the federal reserve: a pooled approach

An evaluation of the forecasts of the federal reserve: a pooled approach

Can the Fed Predict the State of the Economy?

Macroeconomic Forecasting with Mixed Frequency Data: Forecasting US Output Growth and Inflation

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