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Has the forecasting performance of the Federal Reserve’s Greenbooks changed over time?

Has the forecasting performance of the Federal Reserve’s Greenbooks changed over time? AbstractWe investigate how the forecasting performance of the Federal Reserve Greenbooks has changed relative to commercial forecasters between 1974 and 2009. To this end, we analyze time-variation in the Greenbook coefficients in forecast encompassing regressions. Assuming that model coefficients change continuously, we estimate unobserved components models using Bayesian inference techniques. To verify that our results do not depend on the specific way change is modeled, we also allow the coefficients to change discretely rather than continuously and test for structural breaks using classical inference techniques. We find that the Greenbook forecasts have been consistently superior to the commercial forecasts at all horizons throughout our sample period. Although the forecasting performance gap has narrowed at more distant horizons after the early-to-mid 1980s, it remains significant. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The B.E. Journal of Macroeconomics de Gruyter

Has the forecasting performance of the Federal Reserve’s Greenbooks changed over time?

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Publisher
de Gruyter
Copyright
©2017 Walter de Gruyter GmbH, Berlin/Boston
ISSN
1935-1690
eISSN
1935-1690
DOI
10.1515/bejm-2016-0130
Publisher site
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Abstract

AbstractWe investigate how the forecasting performance of the Federal Reserve Greenbooks has changed relative to commercial forecasters between 1974 and 2009. To this end, we analyze time-variation in the Greenbook coefficients in forecast encompassing regressions. Assuming that model coefficients change continuously, we estimate unobserved components models using Bayesian inference techniques. To verify that our results do not depend on the specific way change is modeled, we also allow the coefficients to change discretely rather than continuously and test for structural breaks using classical inference techniques. We find that the Greenbook forecasts have been consistently superior to the commercial forecasts at all horizons throughout our sample period. Although the forecasting performance gap has narrowed at more distant horizons after the early-to-mid 1980s, it remains significant.

Journal

The B.E. Journal of Macroeconomics – de Gruyter

Published: Jun 5, 2017

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