Testing Homogeneity of Japanese CPI Forecasters

Journal of Forecasting (Impact Factor: 0.93). 01/2009; 29(5):435-441. DOI: 10.1002/for.1130
Source: RePEc


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.

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    ABSTRACT: This paper examines the asymmetry of the loss functions of the Japanese government, the International Monetary Fund (IMF), and private forecasters for Japanese output growth and inflation forecasts. It tests the rationality of the forecasts, assuming a possibly asymmetric loss function. The results indicate considerable evidence of asymmetry. The 15-month forecasts are overpredicted, irrespective of forecaster identity or the target variable. However, the biases in the three-month forecasts vary among forecasters: the IMF provides prudent short-term forecasts for output growth and inflation, while private forecasters provide unbiased inflation forecasts. The government uses the information provided in the IMF and consensus forecasts efficiently when making its own forecasts. A comparison with the projections for the German economy indicates that the biases of the Japanese government may be attributable to its debt-to-GDP ratio, which is the highest among advanced economies.
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