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Forecast Errors and Uncertainty Shocks

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...

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Bibliographic Details
Main Author: Nowak, Sylwia
Other Authors: Chatterjee, Pratiti
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2016
Series:IMF Working Papers
Subjects:
Business Cycles
Inflation
Short-term Capital Movements
Economic Forecasting
Criteria For Decision-making Under Risk And Uncertainty
Deflation
Current Account Adjustment
Balance Of Payments
Exports And Imports
International Economics
Forecasting
Price Level
Cycles
Forecasting And Other Model Applications
Current Account Balance
Economic Growth
Prices
Macroeconomics
Business Fluctuations
Prices, Business Fluctuations, And Cycles: General (includes Measurement And Data)
United States
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
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
Physical Description:15 pages
ISBN:9781475555523

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