“Strategic Bias and Professional Affiliations of Macroeconomic Forecasters”

Journal of Forecasting (Impact Factor: 0.93). 03/2009; 28(2):120-130. DOI: 10.1002/for.1095
Source: RePEc


This paper investigates strategic motives of macroeconomic forecasters and the effect of their professional affiliations. The 'wishful expectations hypothesis' suggests that a forecaster predicts what his employer wishes. The 'publicity hypothesis' argues that forecasters are evaluated by both accuracy and ability to generate publicity, and that forecasters in industries that emphasize publicity most will make most extreme and least accurate predictions. The 'signaling hypothesis' asserts that an extreme forecast signals confidence in own ability, because incompetent forecasters would mimic others to avoid public notice. Empirical evidence from a 26-year panel of annual GDP forecasts is con-sistent with the publicity hypothesis. This indicates that conventional tests of rationality are biased toward rejecting the rational expectations hypothesis. Copyright ? 2008 John Wiley & Sons, Ltd.

Full-text preview

Available from:
  • Source
    • "They find that forecasters who are older and more established produce more radical forecasts. Based on a panel of Japanese GDP forecasts, Ashiya (2009) finds that forecasters are concerned about publicity when submitting their forecast. Based on the method of Bernhardt et al. (2006), Pierdzioch et al. (2010) test for strategic behavior of oil-price forecasters. "
    [Show abstract] [Hide abstract]
    ABSTRACT: The Federal Open Market Committee (FOMC) of the Federal Reserve consists of voting- and non-voting members. Apart from deciding about interest rate policy, members individually formulate regular inflation forecasts. This paper uncovers systematic differences in individual inflation forecasts submitted by voting and non-voting members. Based on a data set with individual forecasts recently made available it is shown that non-voters systematically overpredict inflation relative to the consensus forecast if they favor tighter policy and underpredict inflation if the favor looser policy. These findings are consistent with non-voting member following strategic motives in forecasting, i.e. non-voting members use their forecast to influence policy deliberation.
    Preview · Article · Jan 2010 · European Journal of Political Economy
  • Source
    [Show abstract] [Hide abstract]
    ABSTRACT: The survey of Professional Forecasters (SPF) for Russia is a "double" of American SPF by FRB of Philadelphia and European SPF by ECB. It has been conducted for more than 10 years. A large set of main macroeconomic indicators' forecasts made by leading experts has been accumulated up to this point. This makes it possible to analyse the ins and outs of macroeconomic forecasting as well as its quality and usefulness for practical purposes. One of the most interesting topics in this field is an ability or inability of professional forecasters to predict turning points of business cycles, especially peaks. We analysed this concern for Russia and found that forecasts of real GDP are probably too inertial and simultaneously too much based on emotions to be able to give important signals of cyclical turning points in advance. To test the universality of these results we tried some tests for the SPF by FRB of Philadelphia and found that American forecasters are definitely more successful in predicting cyclical troughs. However, their ability to predict cyclical peaks is also under serious doubts. This gives some additional grounds for the hypothesis of a "wishful bias": possibly the majority of professional forecasters avoids predicting such annoying and undesirable events like recessions.
    Full-text · Article ·
  • Source
    [Show abstract] [Hide abstract]
    ABSTRACT: This paper investigates whether some forecasters consistently outperform others using Japanese CPI forecast data of 42 forecasters over the past 18 quarters. It finds that the accuracy rankings of 0, 1, 2, and 5-month forecasts are significantly different from those that might be expected when all forecasters had equal forecasting ability. Moreover, their rankings of the relative forecast levels are also significantly different from a random one. Copyright © 2009 John Wiley & Sons, Ltd.
    Preview · Article · Jan 2009 · Journal of Forecasting
Show more