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How reliable are forecasts of GDP growth and inflation for countries with limited coverage?

How reliable are forecasts of GDP growth and inflation for countries with limited coverage?

Krkoska, Libor and Teksoz, Utku (2009) How reliable are forecasts of GDP growth and inflation for countries with limited coverage? Economic Systems, 33 (4). pp. 376-388. ISSN 0939-3625 (doi:10.1016/j.ecosys.2009.04.003)

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Abstract

This paper analyses the performance of GDP growth and inflation forecasts for 25 transition countries between 1994 and 2007, as provided by 13 international institutions, including multilateral, private and academic forecasters. The empirical results show that there is a positive correlation between the number of forecasters covering a given country and the forecast accuracy. Simple combined forecasts are shown to be unbiased and more accurate than most of the individual forecasters, although also inefficient. However, only a few institutions provide efficient and unbiased forecasts, with just one out of 13 forecasters providing both unbiased and efficient forecasts of both GDP growth and inflation in the observed period. The directional analysis shows a correct forecast of the change in the forecast indicator in over two thirds of cases. However, the eventual outcome is within the range of available forecasts in less than half of the cases, with more than 40% of outcomes for GDP growth above the highest forecast. Encouragingly, forecasts are shown to be improving over time and becoming more accurate with the increase in the number of forecasting institutions – forecast accuracy measured by mean absolute error improves by 0.3 percentage points for growth and by 0.2 percentage points for inflation for each additional institution providing forecasts.

Item Type: Article
Uncontrolled Keywords: macroeconomic forecasting-evaluation, bias, efficiency, transition
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HF Commerce
H Social Sciences > HG Finance
Faculty / Department / Research Group: Faculty of Business > Department of International Business & Economics
Related URLs:
Last Modified: 14 Oct 2016 09:19
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
URI: http://gala.gre.ac.uk/id/eprint/7821

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