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Has the Economy Become More Predictable? Changes in Greenbook Forecast Accuracy

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  • PETER TULIP

Abstract

Several researchers have recently documented large reductions in economic volatility. But a more important question may be whether the economy has become more predictable. Using forecasts from the Federal Reserve Greenbooks, I find that inflation and output have become more predictable, though the results for output are somewhat mixed. The reductions in unpredictability (if any) are significantly smaller than reductions in volatility. Associated with this, the predictable component of fluctuations in output and inflation has virtually disappeared.

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  • Peter Tulip, 2009. "Has the Economy Become More Predictable? Changes in Greenbook Forecast Accuracy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(6), pages 1217-1231, September.
    • Handle: RePEc:wly:jmoncb:v:41:y:2009:i:6:p:1217-1231
    DOI: 10.1111/j.1538-4616.2009.00253.x
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    3. Morikawa, Masayuki, 2022. "Uncertainty in long-term macroeconomic forecasts: Ex post evaluation of forecasts by economics researchers," The Quarterly Review of Economics and Finance, Elsevier, vol. 85(C), pages 8-15.
    4. Andriantomanga, Zo, 2023. "The role of survey-based expectations in real-time forecasting of US inflation," MPRA Paper 119904, University Library of Munich, Germany.
    5. Knotek, Edward S. & Zaman, Saeed, 2023. "Real-time density nowcasts of US inflation: A model combination approach," International Journal of Forecasting, Elsevier, vol. 39(4), pages 1736-1760.
    6. Joshua Bernstein & Rupal Kamdar, 2023. "Rationally Inattentive Monetary Policy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 48, pages 265-296, April.
    7. Ekşi Ozan & Orman Cüneyt & Taş Bedri Kamil Onur, 2017. "Has the forecasting performance of the Federal Reserve’s Greenbooks changed over time?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 17(2), pages 1-25, June.
    8. Yoichi Tsuchiya, 2021. "The value added of the Bank of Japan's range forecasts," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 40(5), pages 817-833, August.
    9. Chad Fulton & Kirstin Hubrich, 2021. "Forecasting US Inflation in Real Time," Econometrics, MDPI, vol. 9(4), pages 1-20, October.
    10. Paul Hubert, 2015. "Revisiting the Greenbook’s relative forecasting performance," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 151-179.
    11. Lillian R. Gaeto & Sandeep Mazumder, 2019. "Measuring the Accuracy of Federal Reserve Forecasts," Southern Economic Journal, John Wiley & Sons, vol. 85(3), pages 960-984, January.
    12. Gregory R. Duffee, 2023. "Macroeconomic News in Asset Pricing and Reality," Journal of Finance, American Finance Association, vol. 78(3), pages 1499-1543, June.
    13. Arai, Natsuki, 2020. "Investigating the inefficiency of the CBO’s budgetary projections," International Journal of Forecasting, Elsevier, vol. 36(4), pages 1290-1300.

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