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The Efficiency of Multivariate Macroeconomic Forecasts

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  • Bruno Deschamps
  • Christos Ioannidis

Abstract

type="main"> We examine the efficiency of multivariate macroeconomic forecasts by estimating a vector autoregressive model on the forecast revisions of four variables (GDP, inflation, unemployment and wages). Using a data set of professional forecasts for the G7 countries, we find evidence of cross-series revision dynamics. Specifically, forecasts revisions are conditionally correlated to the lagged forecast revisions of other macroeconomic variables, and the sign of the correlation is as predicted by conventional economic theory. This indicates that forecasters are slow to incorporate news across variables. We show that this finding can be explained by forecast underreaction.

Suggested Citation

  • Bruno Deschamps & Christos Ioannidis, 2014. "The Efficiency of Multivariate Macroeconomic Forecasts," Manchester School, University of Manchester, vol. 82(5), pages 509-523, September.
    • Handle: RePEc:bla:manchs:v:82:y:2014:i:5:p:509-523
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    References listed on IDEAS

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