Evaluating the Efficiency of the FOMC's New Economic Projections

Abstract

Since 2007, Federal Open Market Committee (FOMC) policymakers have been publishing detailed numerical projections of macroeconomic series over the next 3 years. By testing whether the revisions to these projections are unpredictable, I find that FOMC's efficiency is generally accepted for inflation but often rejected for real economic variables, notably for the unemployment rate. The rejection is due to the strong autocorrelation of revisions, which may reflect information rigidity of FOMC's unemployment projections. The joint efficiency of the entire projection is accepted in most cases.

The Bias and Efficiency of the ECB Inflation Projections: A State Dependent Analysis

“…These ndings point to an "under-reaction" of the ECB to new information, and can be due to information rigidities (Coibion and Gorodnichenko, 2015) or smoothing (Tillman, 2011). 2 A large number of papers has analyzed the bias and eciency of the forecasts produced by the Federal Reserve: Clements et al (2007), Capistran (2008), Sinclair et al (2010), Messina et al (2015) and El-Shagi et al (2016) for Greenbook forecasts, and Romer and Romer (2008) and Arai (2016) for FOMC. We depart from these studies in two dimensions: rst, we analyze bias and eciency of the ECB projections, which have not been studied previously, with the exception of Kontogeorgos and Lambrias (2019).…”

Raiders of the lost high‐frequency forecasts: New data and evidence on the efficiency of the Fed's forecasting

“…We introduce these between-Greenbook forecasts and use a preanalysis plan to study their statistical efficiency. Our paper expands on research that improves the availability of real-time forecast data, such as Croushore and Van Norden (2018), and also expands on literature that evaluates the real-time performance of professional forecasters, such as Arai (2016) and Baker et al (2020).…”

Forecasting FOMC Forecasts

“…12 Their algorithm combines least squares with a selection criteria that excludes insignificant coefficients and tests for both parameter constancy and white-noise residuals; the critical values for rejection are not fixed in advance but, rather, are calculated sequentially. Table 1 reports results for equations (1) and 2, labeled the General formulation, and for the simplified formulation, labeled the Specific formulation, using a significance level of five percent.…”