Chang, Chia-Lin and Franses, Philip Hans and McAleer, Michael (2011) Are Forecast Updates Progressive? [Working Paper or Technical Report] (Unpublished)
Available under License Creative Commons Attribution Non-commercial.
Official URL: http://eprints.ucm.es/12434/
Many macro-economic forecasts and forecast updates, such as those from the IMF and OECD, typically involve both a model component, which is replicable, as well as intuition (namely, expert knowledge possessed by a forecaster), which is non-replicable. . Learning from previous mistakes can affect both the replicable component of a model as well as intuition. If learning, and hence forecast updates, are progressive, forecast updates should generally become more accurate as the actual value is approached. Otherwise, learning and forecast updates would be neutral. The paper proposes a methodology to test whether macro-economic forecast updates are progressive, where the interaction between model and intuition is explicitly taken into account. The data set for the empirical analysis is for Taiwan, where we have three decades of quarterly data available of forecasts and their updates of two economic fundamentals, namely the inflation rate and real GDP growth rate. The empirical results suggest that the forecast updates for Taiwan are progressive, and that progress can be explained predominantly by improved intuition.
|Item Type:||Working Paper or Technical Report|
|Additional Information:||JEL Classifications: C53, C22, E27, E37.|
|Uncontrolled Keywords:||Macro-economic forecasts, econometric models, intuition, learning, progressive forecast updates, forecast errors.|
|Subjects:||Social sciences > Economics > Econometrics|
Social sciences > Economics > Macroeconomics
|Series Name:||Documentos de trabajo del Instituto Complutense de Análisis Económico|
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|Deposited On:||16 Mar 2011 09:20|
|Last Modified:||26 Aug 2011 12:53|
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