A Simple Forecasting Accuracy Criterion Under Rational Expectations: Evidence From the World Economic Outlook and Time Series Models

June 1, 1992

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Format: Chicago

José M. Barrionuevo A Simple Forecasting Accuracy Criterion Under Rational Expectations: Evidence From the World Economic Outlook and Time Series Models, (USA: International Monetary Fund, 1992) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

A simple criterion based on the properties of the forecast error is presented to evaluate the accuracy of forecasts. The efficiency conditions of an optimization problem are used to show that under rational expectations the standard statistical conditions are necessary, but not sufficient to ensure efficiency. This criterion is used to examine the accuracy of the World Economic Outlook projections of growth and inflation for the seven major industrial countries. Time series models are then estimated and the efficiency of the World Economic Outlook projections relative to a benchmark time series model is examined. A number of empirical tests suggest that the year ahead projections of growth and inflation in the World Economic Outlook are unbiased after 1982.

Subject: Economic forecasting, Economic sectors, Economic theory, Industrial sector, Inflation, Prices, Production, Production growth, Rational expectations

Keywords: Forecast error, Industrial sector, Inflation, Inflation error, Least squares, Models of inflation, Production growth, Q statistic test, Random walk, Rational expectations, Theil inequality statistic TS, Time series forecast, Time series model, WP

Publication Details

Pages:

34
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1992/048
Stock No:

WPIEA0481992
ISBN:

9781451972238
ISSN:

1018-5941

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