An evaluation of the predictions of the Federal Reserve

To successfully implement monetary policy, the Federal Reserve System must make forecasts about the future state of the economy. Some of the characteristics of these forecasts are examined. The analysis presents the usual error measures and tests for rationality. These predictions are compared with...

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Bibliographic Details
Published in:International journal of forecasting 1999-01, Vol.16 (1), p.17
Main Authors: Joutz, Fred, Stekler, H O
Format: Article
Language:English
Subjects:
Economic forecasting
Economic models
Errors
Federal Reserve monetary policy
Forecasting techniques
Regression analysis
Studies
Online Access:Get full text
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Summary:To successfully implement monetary policy, the Federal Reserve System must make forecasts about the future state of the economy. Some of the characteristics of these forecasts are examined. The analysis presents the usual error measures and tests for rationality. These predictions are compared with those generated by ARIMA models and the ASA/NBER surveys. It is concluded that the Federal Reserve System predictions tended to yield the same type of errors that private forecasters have displayed; in some periods either real GNP or inflation had systematic errors; turning point errors occurred prior to recessions; and the forecasts were unbiased, but showed evidence of inefficiency.
ISSN:0169-2070
1872-8200