Search Results

You are looking at 1 - 6 of 6 items for :

  • "forecasting bias and efficiency" x
Clear All
Oya Celasun, Jungjin Lee, Mr. Mico Mrkaic, and Mr. Allan Timmermann
This paper examines the performance of World Economic Outlook (WEO) growth forecasts for 2004-17. Short-term real GDP growth forecasts over that period exhibit little bias, and their accuracy is broadly similar to those of Consensus Economics forecasts. By contrast, two- to five-year ahead WEO growth forecasts in 2004-17 tend to be upward biased, and in up to half of countries less accurate than a naïve forecast given by the average growth rate in the recent past. The analysis suggests that a more efficient use of available information on internal and external factors—such as the estimated output gap, projected terms of trade, and the growth forecasts of major trading partners—can improve the accuracy of some economies’ growth forecasts.
Oya Celasun, Jungjin Lee, Mr. Mico Mrkaic, and Mr. Allan Timmermann

information on internal and external factors—such as the estimated output gap, projected terms of trade, and the growth forecasts of major trading partners—can improve the accuracy of some economies’ growth forecasts. JEL Classification Numbers: C12, C40, C53 Keywords: Forecasting, forecasting bias and efficiency Author’s E-Mail Address: ocelasun@imf.org , mmrkaic@imf.org , jlee2@imf.org , atimmermann@ucsd.edu . 1 The authors thank Gian Maria Milesi-Ferretti for very useful discussions, Bryan Zou and Ritong Qu for excellent research assistance, and

International Monetary Fund

the basis of a simple average of forecast errors (the mean error—ME) and root mean squared error (RMSE), which indicates the magnitude and variance of the errors independent of the direction of forecast errors. A standard set of statistical tests is applied to assess the presence of forecast bias and efficiency; the latter to assess whether forecasts were based on all information available at the time of budget preparation. C. International Comparison of Forecast Accuracy Fiscal projections 7. During 1995–2003, Ireland’s fiscal balance was on average 0

Theo S. Eicher, David J. Kuenzel, Mr. Chris Papageorgiou, and Mr. Charalambos Christofides

forecasts relative to naive forecast models of directional changes. Forecasts are optimal when they are unbiased and efficient. Our work extends previous studies on crisis forecasts in four dimensions. First, we utilize the regression approaches of Mincer and Zarnowitz (1969) and Holden and Peel (1990) to examine forecast bias and efficiency to assess whether forecasts are optimal. Second, we examine whether IMF forecasts outperform naive forecast models of directional changes (see Merton, 1981 , Henriksson and Merton, 1981 , and Schnader and Stekler, 1990 ). Third

Theo S. Eicher, David J. Kuenzel, Mr. Chris Papageorgiou, and Mr. Charalambos Christofides
Financial crises pose unique challenges for forecast accuracy. Using the IMF’s Monitoring of Fund Arrangement (MONA) database, we conduct the most comprehensive evaluation of IMF forecasts to date for countries in times of crises. We examine 29 macroeconomic variables in terms of bias, efficiency, and information content to find that IMF forecasts add substantial informational value as they consistently outperform naive forecast approaches. However, we also document that there is room for improvement: two thirds of the key macroeconomic variables that we examine are forecast inefficiently and 6 variables (growth of nominal GDP, public investment, private investment, the current account, net transfers, and government expenditures) exhibit significant forecast bias. Forecasts for low-income countries are the main drivers of forecast bias and inefficiency, reflecting perhaps larger shocks and lower data quality. When we decompose the forecast errors into their sources, we find that forecast errors for private consumption growth are the key contributor to GDP growth forecast errors. Similarly, forecast errors for non-interest expenditure growth and tax revenue growth are crucial determinants of the forecast errors in the growth of fiscal budgets. Forecast errors for balance of payments growth are significantly influenced by forecast errors in goods import growth. The results highlight which macroeconomic aggregates require further attention in future forecast models for countries in crises.
International Monetary Fund
This Selected Issues paper for Ireland highlights that fiscal consolidation resulted in a tremendous reduction in public debt from nearly 100 percent of GDP in 1991 to about 30 percent in 2004. This has reflected a combination of policy decisions and economic circumstances. Excluding 2001, when the economy has been affected by the global economic slowdown, Ireland has in general consistently enjoyed favorable surprises in its public finances. Indeed, during this period, the actual fiscal outturns have exceeded budget forecasts on average by 0.3 percent of GDP a year.