Evaluating the efficiency of growth forecasts

JOSÉ DANIEL AROMÍ

Buenos Aires

Jornada; Jornadas Nacionales de Econometría; 2015

FCE UBA

Medium term forecasts are analyzed for a set of 49 countries over a 20 year period. The relation between mean forecast errors, understood as forecast minus realization, and a lagged measure of sentiment is evaluated. There is no association between mean forecast errors and the one-year lagged sentiment metric. In contrast, when five-year lags are considered, a positive association between sentiment and forecast errors is detected. When the sample is split between developed and emergent economies, the association is observed only for emergent economies. The evidence is consistent with overreactions that result in systematically biased forecasts.