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On the accuracy of private forecasts of inflation and growth in Brazil

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  • Hamid Baghestani
  • Cassia Marchon

Abstract

This study evaluates the accuracy of the private-sector forecasts of inflation and growth in industrial production collected by the Brazilian Central Bank (BCB). In addition to examining directional accuracy, we utilize as benchmarks both naïve and univariate autoregressive moving-average (ARMA) forecast and test rationality under flexible loss to allow for the possibility of asymmetric loss. Our analysis yields three important findings: First, the private forecasts are directionally accurate. Second, they are superior to the naïve forecasts and are either superior or as accurate as the ARMA forecasts. Third, the private forecasts are generally rational under either asymmetric or symmetric loss. Such findings point to the success of the BCB in anchoring private expectations. Given their importance as monetary policy inputs, we conclude that private inflation and growth forecasts are of value to the BCB for policymaking. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Hamid Baghestani & Cassia Marchon, 2015. "On the accuracy of private forecasts of inflation and growth in Brazil," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 39(2), pages 370-381, April.
    • Handle: RePEc:spr:jecfin:v:39:y:2015:i:2:p:370-381
    DOI: 10.1007/s12197-013-9263-1
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    References listed on IDEAS

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    More about this item

    Keywords

    Monetary policy; Inflation targeting; Rationality; Emerging market economies; E3; E5;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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