Boero, Gianna , Smith, Jeremy (Jeremy P.) and Wallis, Kenneth Frank. (2008) Evaluating a three-dimensional panel of point forecasts : the Bank of England survey of external forecasters. International Journal of Forecasting, Vol.24 (No.3). pp. 354-367. ISSN 0169-2070

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Abstract

This article provides a first analysis of the forecasts of inflation and GDP growth obtained from the Bank of England's Survey of External Forecasters, considering both the survey average forecasts published in the quarterly Inflation Report, and the individual survey responses, recently made available by the Bank. These comprise a conventional incomplete panel dataset, with an additional dimension arising from the collection of forecasts at several horizons; both point forecasts and density forecasts are collected. The inflation forecasts show good performance in tests of unbiasedness and efficiency, albeit over a relatively calm period for the UK economy, and there is considerable individual heterogeneity. For GDP growth, inaccurate real-time data and their subsequent revisions are seen to cause serious difficulties for forecast construction and evaluation, although the forecasts are again unbiased. There is evidence that some forecasters have asymmetric loss functions.

Item Type:	Journal Article
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HJ Public Finance
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Economic forecasting -- Great Britain, Great Britain -- Economic conditions -- 2001-, Business forecasting
Journal or Publication Title:	International Journal of Forecasting
Publisher:	Elsevier
ISSN:	0169-2070
Date:	April 2008
Volume:	Vol.24
Number:	No.3
Page Range:	pp. 354-367
Identification Number:	10.1016/j.ijforecast.2008.04.003
Status:	Peer Reviewed
Access rights to Published version:	Open Access
Description:	Version accepted by publisher (post-print, after peer review, before copy-editing).
References:	Bean, C. and Jenkinson, N. (2001). The formulation of monetary policy at the Bank of England. Bank of England Quarterly Bulletin, 41(4), 434-441. Boero, G., Smith, J. and Wallis, K.F. (2008a). Uncertainty and disagreement in economic prediction: the Bank of England Survey of External Forecasters. Economic Journal, forthcoming. _____ (2008b). Here is the news: forecast revisions in the Bank of England Survey of External Forecasters. National Institute Economic Review, No.203, 68-77. Casillas-Olvera, G. and Bessler, D.A. (2006). Probability forecasting and central bank accountability. Journal of Policy Modeling, 28, 223-234. Croushore, D. (2006). Forecasting with real-time macroeconomic data. In Handbook of Economic Forecasting (G. Elliott, C.W.J. Granger and A. Timmermann, eds), pp.961- 982. Amsterdam: North-Holland. Davies, A. (2006). A framework for decomposing shocks and measuring volatilities derived from multi-dimensional panel data of survey forecasts. International Journal of Forecasting, 22, 373-393. Davies, A. and Lahiri, K. (1995). A new framework for analyzing survey forecasts using three-dimensional panel data. Journal of Econometrics, 68, 205-227. Davies, A. and Lahiri, K. (1999). Re-examining the rational expectations hypothesis using panel data on multi-period forecasts. In Analysis of Panels and Limited Dependent Variable Models (C. Hsiao, M.H. Pesaran, K. Lahiri and L.F. Lee, eds), pp.226-254. Cambridge: Cambridge University Press. Elliott, G., Komunjer, I. and Timmermann, A. (2005). Estimation and testing of forecast rationality under flexible loss. Review of Economic Studies, 72, 1107-1125. Engelberg, J., Manski, C.F. and Williams, J. (2008). Comparing the point predictions and subjective probability distributions of professional forecasters. Journal of Business and Economic Statistics, forthcoming. Garratt, A., Lee, K.C., Mise, E. and Shields, K. (2007). Real time representations of the UK output gap in the presence of model uncertainty. Unpublished paper, Birkbeck College and University of Leicester. Groen, J.J.J., Kapetanios, G. and Price, S. (2007). Real time evaluation of Inflation Report and Greenbook forecasts for inflation and growth. Unpublished paper, Bank of England. Presented at the Royal Economic Society Annual Conference, University of Warwick, March 2008. McNees, S.K. (1979). The forecasting record for the 1970s. New England Economic Review, September/October 1979, 33-53. Milburn, M.A. (1978). Sources of bias in the prediction of future events. Organizational Behavior and Human Performance, 21, 17-26. Mitchell, J., Smith, R.J., Weale, M.R., Wright, S. and Salazar, E.L. (2005) An indicator of monthly GDP and an early estimate of quarterly GDP growth. Economic Journal, 115, F108-F129. Svensson, L.E.O. (1997). Inflation forecast targeting: implementing and monitoring inflation targets. European Economic Review, 41, 1111-1146. Forecast sources cited: Bank of England Inflation Report (quarterly): http://www.bankofengland.co.uk/publications/inflationreport/index.htm Consensus Economics: http://www.consensusforecasts.com/ HM Treasury Forecasts for the UK Economy (monthly): http://www.hm-treasury.gov.uk/economic_data_and_tools/data_index.cfm US Survey of Professional Forecasters: http://www.philadelphiafed.org/econ/spf/index.cfm
URI:	http://wrap.warwick.ac.uk/id/eprint/144

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