Forecast Errors and Uncertainty Shocks
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Summary:
Macroeconomic forecasts are persistently too optimistic. This paper finds that common factors related to general uncertainty about U.S. macrofinancial prospects and global demand drive this overoptimism. These common factors matter most for advanced economies and G- 20 countries. The results suggest that an increase in uncertainty-driven overoptimism has dampening effects on next-year real GDP growth rates. This implies that incorporating the common structure governing forecast errors across countries can help improve subsequent forecasts.
Series:
Working Paper No. 2016/228
Subject:
Balance of payments Business cycles Current account balance Economic forecasting Inflation Prices
English
Publication Date:
November 17, 2016
ISBN/ISSN:
9781475555523/1018-5941
Stock No:
WPIEA2016228
Pages:
15
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