IMF Working Papers

Forecast Errors and Uncertainty Shocks

By Sylwia Nowak, Pratiti Chatterjee

November 17, 2016

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Sylwia Nowak, and Pratiti Chatterjee. Forecast Errors and Uncertainty Shocks, (USA: International Monetary Fund, 2016) accessed November 12, 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

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.

Subject: Balance of payments, Business cycles, Current account balance, Economic forecasting, Inflation, Prices

Keywords: Common factors, Current account balance, Financial market volatility, Forecast error, Forecasting, Forecasts accuracy, G20 industrial nations, Global, Inflation, Spring forecast, Uncertainty, Uncertainty shock, WP

Publication Details

  • Pages:

    15

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2016/228

  • Stock No:

    WPIEA2016228

  • ISBN:

    9781475555523

  • ISSN:

    1018-5941