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Activity Number: 23
Type: Topic Contributed
Date/Time: Sunday, August 9, 2015 : 2:00 PM to 3:50 PM
Sponsor: Business and Economic Statistics Section
Abstract #316368 View Presentation
Title: Time-dependent Bias in the Fed's Greenbook Forecasts
Author(s): Frederick Joutz* and Neil R. Ericsson and Tara Sinclair
Companies: and Federal Reserve Board and The George Washington University
Keywords: Forecast Evaluation ; Business Cycle ; Greenbook ; Impulse Indicator Saturation ; Federal Reserve Board ; United States

Abstract: Building on Sinclair, Joutz, and Stekler (2010), this paper examines the Federal Reserve Board's Greenbook forecasts of U.S. output growth, inflation, and the unemployment rate for potential biases. Standard tests typically fail to detect biases in one-quarter-ahead forecasts. However, impulse indicator saturation (IIS) detects economically large and highly significant time-varying biases. Biases depend on the variable being forecast and the phase of the business cycle. IIS defines a generic procedure for examining forecast properties, it explains why standard tests fail to detect bias, and it provides a potential mechanism for improving forecasts.

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