Search Results
Journal Article
National productivity statistics
Working Paper
Forecasts of inflation for VAR models
Why are forecasts of inflation from VAR models so much worse then their forecasts of real variables? This paper documents that relatively poor performance, and finds that the price equation of a VAR model fitted to U.S. postwar data is poorly specified. Statistical work by other authors has found that coefficients in such price equations may not be constant. Based on specific monetary actions, two changes in monetary policy regimes are proposed. Accounting for those two shifts yields significantly more accurate forecasts and lessens the evidence of misspecification.
Journal Article
The cyclical behavior of prices and employee compensation
Working Paper
On predicting the stage of the business cycle
Macroeconomic forecasts are traditionally stated as point estimates. Retrospective evaluations of forecasts usually assume that the cost of a forecast error increases with the arithmetic magnitude of the error. As a result, measures such as the root-mean-square error (RSME) or the mean absolute error (MAE) are most often used to summarize forecast performance. ; An earlier version of this paper, "The Business Cycle and Economic Forecasting," was presented to the Western Economic Association in July 1986, and to the Federal Reserve System Research Committee on Business Analysis in November ...
Journal Article
Two approaches to macroeconomic forecasting
Working Paper
Defining and improving the accuracy of macroeconomic forecasts : contributions from a VAR model
Thirty years ago it appeared that the best strategy for improving economic forecasts was to build bigger, more detailed models. As the costs of computing plummeted, considerable detail was added to models and more elaborate statistical techniques became feasible.
Working Paper
Inadequate tests of the rationality of expectations
In several recent articles, authors have regressed actual values of macroeconomic aggregates on predicted values and claimed that they were testing the rationality of expectations. This paper interprets those regressions as testing a joint hypothesis of imperfect information and rational expectations. An empirical method is proposed to separate the components of the joint hypothesis. Predictions from two major forecasting services are examined, and results are found that are consistent with rational expectations but inconsistent with the joint hypothesis. It is therefore argued that many ...
Briefing
How useful are consumer surveys as macroeconomic indicators?
Most economic indicators attempt to summarize what happened at a particular time in the past. Consumer surveys, however, examine attitudes and are thus fundamentally different from other widely reported indicators. Some surveys, such as those that measure inflation expectations, have proven to be useful to economists and policymakers, while the evidence is more mixed for others, such as forecasts of consumer spending.
Journal Article
Vector autoregressions as a tool for forecast evaluations
In his article, Vector Autoregressions as a Tool for Forecast Evaluation, Roy H. Webb proposes that VAR forecasts be used as a standard of comparison for other forecasts. He begins by explaining how conventional forecasting models are constructed and used, and summarizes a few common objections to these models. He then describes the VAR methodology and compares forecasts from a simple VAR model with those from a consulting firm that uses a conventional model and with a series of consensus forecasts. The VAR model holds its own in this competition; in fact, only the VAR model is able to ...
Journal Article
Forecasts 1984
Roy H. Webb summarizes the consensus outlook for the current year in Forecasts 1984. (A more detailed summary of individual forecasts is available in the Federal Reserve Bank of Richmonds Business Forecasts 1984.) Most forecasters are calling for a continuation of the above-average growth and relatively low inflation of 1983. However, the consensus forecast has not been very accurate in the last two years.