Professional economic forecasts: Are they worth their costs?

Gordon Leitch · J. Ernesttanner

66 citations0/0 files storedJournal of Forecasting

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Forecasting Techniques and Applications Monetary Policy and Economic Impact Grey System Theory Applications

Abstract

Abstract Most economic forecast evaluations dating back 20 years show that professional forecasters add little to the forecasts generated by the simplest of models. Using various types of forecast error criteria, these evaluations usually conclude that the professional forecasts are little better than the no‐change or ARIM A type forecast. It is our contention that this conclusion is mistaken because the conventional error criteria may not capture why forecasts are ma& or how they are used. Using forecast directional accuracy, the criterion which has been found to be highly correlated with profits in an interest rate setting, we find that professional GNP forecasts dominate the cheaper alternatives. Moreover, there appears to be no systematic relationship between this preferred criterion and the error measures used in previous studies.

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References

1991Economic Forecast Evaluation: Profits versus the Conventional Error Measures 1972The Prediction Performance of the FRB-MIT-PENN Model of the U.S. Economy 1975The Ex Ante Prediction Performance of the St. Louis and FRB-MIT-PENN Econometric Models and Some Results on Composite Predictors 1969An Appraisal of Short-Term Economic Forecasts

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