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Forecasting FOMC Forecasts

Author

Listed:
  • S. Yanki Kalfa

    (Rady School of Management, The University of California at San Diego, La Jolla, CA 92093, USA)

  • Jaime Marquez

    (School of Advanced International Studies, Johns Hopkins, Washington, DC 20036, USA)

Abstract

(Hendry 1980, p. 403) The three golden rules of econometrics are “test, test, and test”. The current paper applies that approach to model the forecasts of the Federal Open Market Committee over 1992–2019 and to forecast those forecasts themselves. Monetary policy is forward-looking, and as part of the FOMC’s effort toward transparency, the FOMC publishes its (forward-looking) economic projections. The overall views on the economy of the FOMC participants–as characterized by the median of their projections for inflation, unemployment, and the Fed’s policy rate–are themselves predictable by information publicly available at the time of the FOMC’s meeting. Their projections also communicate systematic behavior on the part of the FOMC’s participants.

Suggested Citation

  • S. Yanki Kalfa & Jaime Marquez, 2021. "Forecasting FOMC Forecasts," Econometrics, MDPI, vol. 9(3), pages 1-21, September.
    • Handle: RePEc:gam:jecnmx:v:9:y:2021:i:3:p:34-:d:634996
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    Other versions of this item:

    • S. Yanki Kalfa & Jaime Marquez, 2018. "Forecasting FOMC Forecasts," Working Papers 2018-007, The George Washington University, Department of Economics, H. O. Stekler Research Program on Forecasting.

    References listed on IDEAS

    as
    1. Nakazono, Yoshiyuki, 2013. "Strategic behavior of Federal Open Market Committee board members: Evidence from members’ forecasts," Journal of Economic Behavior & Organization, Elsevier, vol. 93(C), pages 62-70.
    2. Clements,Michael & Hendry,David, 1998. "Forecasting Economic Time Series," Cambridge Books, Cambridge University Press, number 9780521634809.
    3. Stekler, Herman & Symington, Hilary, 2016. "Evaluating qualitative forecasts: The FOMC minutes, 2006–2010," International Journal of Forecasting, Elsevier, vol. 32(2), pages 559-570.
    4. Ericsson, Neil R., 2016. "Eliciting GDP forecasts from the FOMC’s minutes around the financial crisis," International Journal of Forecasting, Elsevier, vol. 32(2), pages 571-583.
    5. Phillips, Peter C.B., 2005. "Automated Discovery In Econometrics," Econometric Theory, Cambridge University Press, vol. 21(1), pages 3-20, February.
    6. Natsuki Arai, 2016. "Evaluating the Efficiency of the FOMC's New Economic Projections," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(5), pages 1019-1049, August.
    7. David Romer, 2010. "A New Data Set on Monetary Policy: The Economic Forecasts of Individual Members of the FOMC," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(5), pages 951-957, August.
    8. Fendel, Ralf & Rülke, Jan-Christoph, 2012. "Are heterogeneous FOMC forecasts consistent with the Fed’s monetary policy?," Economics Letters, Elsevier, vol. 116(1), pages 5-7.
    9. Bespalova, Olga, 2018. "Forecast Evaluation in Macroeconomics and International Finance. Ph.D. thesis, George Washington University, Washington, DC, USA," MPRA Paper 117706, University Library of Munich, Germany.
    10. Jennifer L. Castle & David F. Hendry & Andrew B. Martinez, 2017. "Evaluating Forecasts, Narratives and Policy Using a Test of Invariance," Econometrics, MDPI, vol. 5(3), pages 1-27, September.
    11. Clements, Michael P. & Hendry, David F. (ed.), 2011. "The Oxford Handbook of Economic Forecasting," OUP Catalogue, Oxford University Press, number 9780195398649.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Jaime Marquez, 2023. "Stylized Facts of the FOMC’s Longer-Run Forecasts," JRFM, MDPI, vol. 16(3), pages 1-20, February.
    2. Thomas L. Hogan, 2022. "The calculus of dissent: Bias and diversity in FOMC projections," Public Choice, Springer, vol. 191(1), pages 105-135, April.

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    More about this item

    Keywords

    FOMC; Taylor rule; vector autoregression; inflation; unemployment; SEP;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics

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