IDEAS home Printed from https://ideas.repec.org/p/hhs/nierwp/0098.html
   My bibliography  Save this paper

Empirical Studies in Consumption, House Prices and the Accuracy of European Growth and Inflation Forecasts

Author

Listed:
  • Barot, Bharat

    (National Institute of Economic Research)

Abstract

BAROT, Bharat, This Ph.D. thesis, Empirical Studies in Consumption, House Prices and the Accuracy of European Growth and Inflation Forecasts contains four self-contained chapters: Chapter I gives a brief introduction to the topic of the thesis and summarizes the main results. Chapter II an aggregated consumption function based on the life cycle hypothesis using the error correction methodology is estimated for Sweden. Wealth in its disaggregated form (financial and housing wealth) is incorporated in the consumption function, along with basic standard explanatory variables including the unemployment variable. Applying Hendry’s general to specific modelling strategy one final model is deduced. The study finds that each of the primary components of wealth has an equal role for consumer’s expenditure. In addition the study finds significant effects from employment and interest rates. Chapter III a stock-flow model serves as the theoretical basis for the fundamental determinants of real estate construction and prices. A housing market model for Sweden has been estimated on semi-annual data for 1970-1998 by separately modelling the demand and the supply sides, specified in error correction form. The supply side is based on Tobin’s q-index. The results indicate that even in a turbulent period, Swedish house prices and housing investment are tracked quite well with this specification. The importance of the simulations and their usefulness to Swedish policy makers is discussed. Both ex post and ex ante forecasts using the model gives reasonable results. Chapter IV (with Zan Yang), we estimate quarterly dynamic housing demand and investment supply models for Sweden and the UK for the sample period 1970-1998, using an Error Correction Method (ECM). In order to facilitate comparisons of results between Sweden and the UK we model both countries similarly using comparable exogenous variables. The long run income elasticity for Sweden and the UK are both constrained to be equal to one. The long run semi-elasticity for interest rate is 2.1 for Sweden and 0.9 for the UK. The speed of adjustment on the demand side is 12% and 23% for Sweden and the UK, respectively, while on the supply side it is 6% and 48%. Tobin’s q Granger causes housing investment. Chapter V (with Lars-Erik Öller), evaluates the one-year ahead forecasts by the OECD and by national institutes of GDP growth and inflation in 13 European countries. RMSE was large 1.9% for growth and 1.6% for inflation. Six (11) OECD and ten (7) institute growth forecasts records were significantly better than an average growth forecast (the current year forecast). All full record-length inflation forecasts were significantly better than both naive alternatives. There were no significant differences in accuracy between the forecasts of the OECD and the institutes. Two forecasts were found to be biased and one had auto-correlated errors.

Suggested Citation

  • Barot, Bharat, 2007. "Empirical Studies in Consumption, House Prices and the Accuracy of European Growth and Inflation Forecasts," Working Papers 98, National Institute of Economic Research.
    • Handle: RePEc:hhs:nierwp:0098
    as

    Download full text from publisher

    File URL: http://www.konj.se/download/18.4ee9b512150ed5e093b90702/1447246075861/Working-Paper-98-Empirical-Studies-in-Consumption%2C-House-Prices-and-the-Accuracy-of-European-Growth-and-Inflation-Forecasts.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. repec:lan:wpaper:425 is not listed on IDEAS
    2. Francis X. Diebold & Todd A. Gunther & Anthony S. Tay, "undated". "Evaluating Density Forecasts," CARESS Working Papres 97-18, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
    3. Fildes, Robert & Stekler, Herman, 2002. "The state of macroeconomic forecasting," Journal of Macroeconomics, Elsevier, vol. 24(4), pages 435-468, December.
    4. Filip Keereman, 1999. "The track record of the Commission forecasts," European Economy - Economic Papers 2008 - 2015 137, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    5. Diebold, Francis X & Mariano, Roberto S, 2002. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 134-144, January.
    6. Francis X. Diebold & Anthony S. Tay & Kenneth F. Wallis, 1997. "Evaluating Density Forecasts of Inflation: The Survey of Professional Forecasters," NBER Working Papers 6228, National Bureau of Economic Research, Inc.
    7. repec:lan:wpaper:413 is not listed on IDEAS
    8. Victor Zarnowitz, 1992. "Business Cycles: Theory, History, Indicators, and Forecasting," NBER Books, National Bureau of Economic Research, Inc, number zarn92-1.
    9. Clements,Michael & Hendry,David, 1998. "Forecasting Economic Time Series," Cambridge Books, Cambridge University Press, number 9780521632423, January.
    10. repec:lan:wpaper:539557 is not listed on IDEAS
    11. Mills, Terence C. & Pepper, Gordon T., 1999. "Assessing the forecasters: an analysis of the forecasting records of the Treasury, the London Business School and the National Institute," International Journal of Forecasting, Elsevier, vol. 15(3), pages 247-257, July.
    12. Zarnowitz, Victor, 1992. "Business Cycles," National Bureau of Economic Research Books, University of Chicago Press, number 9780226978901, August.
    13. Stephen K. McNees, 1992. "How large are economic forecast errors?," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 25-42.
    14. repec:lan:wpaper:470 is not listed on IDEAS
    15. N/A, 1969. "How Well Does the National Institute Forecast ?," National Institute Economic Review, National Institute of Economic and Social Research, vol. 50(1), pages 40-52, November.
    16. Brown, Bryan W & Maital, Shlomo, 1981. "What Do Economists Know? An Empirical Study of Experts' Expectations," Econometrica, Econometric Society, vol. 49(2), pages 491-504, March.
    17. Granger, Clive W J, 1996. "Can We Improve the Perceived Quality of Economic Forecasts?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(5), pages 455-473, Sept.-Oct.
    18. Ash, J. C. K. & Smyth, D. J. & Heravi, S. M., 1998. "Are OECD forecasts rational and useful?: a directional analysis," International Journal of Forecasting, Elsevier, vol. 14(3), pages 381-391, September.
    19. McNees, Stephen K., 1989. "Forecasts and actuals: The trade-off between timeliness and accuracy," International Journal of Forecasting, Elsevier, vol. 5(3), pages 409-416.
    20. Mr. Michael J. Artis, 1996. "How Accurate Are the Imf's Short-Term Forecasts? Another Examination of the World Economic Outlook," IMF Working Papers 1996/089, International Monetary Fund.
    21. Wallis, Kenneth F, 1989. "Macroeconomic Forecasting: A Survey," Economic Journal, Royal Economic Society, vol. 99(394), pages 28-61, March.
    22. McNees, Stephen K, 1978. "The "Rationality" of Economic Forecasts," American Economic Review, American Economic Association, vol. 68(2), pages 301-305, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Oller, Lars-Erik & Barot, Bharat, 2000. "The accuracy of European growth and inflation forecasts," International Journal of Forecasting, Elsevier, vol. 16(3), pages 293-315.
    2. Fildes, Robert & Stekler, Herman, 2002. "The state of macroeconomic forecasting," Journal of Macroeconomics, Elsevier, vol. 24(4), pages 435-468, December.
    3. repec:lan:wpaper:539557 is not listed on IDEAS
    4. repec:lan:wpaper:470 is not listed on IDEAS
    5. Vuchelen, Jef & Gutierrez, Maria-Isabel, 2005. "A direct test of the information content of the OECD growth forecasts," International Journal of Forecasting, Elsevier, vol. 21(1), pages 103-117.
    6. repec:lan:wpaper:425 is not listed on IDEAS
    7. repec:lan:wpaper:413 is not listed on IDEAS
    8. Jordi Pons, 2001. "The rationality of price forecasts: a directional analysis," Applied Financial Economics, Taylor & Francis Journals, vol. 11(3), pages 287-290.
    9. repec:cnb:ocpubc:06 is not listed on IDEAS
    10. Ildeberta Abreu, 2011. "International organisations’ vs. private analysts’ forecasts: an evaluation," Working Papers w201120, Banco de Portugal, Economics and Research Department.
    11. Mihaela Simionescu, 2015. "The Accuracy Analysis of Inflation Rate Forecasts in Euro Area," Global Economic Observer, "Nicolae Titulescu" University of Bucharest, Faculty of Economic Sciences;Institute for World Economy of the Romanian Academy, vol. 3(1), pages 80-85, May.
    12. repec:hum:wpaper:sfb649dp2008-073 is not listed on IDEAS
    13. Jef Vuchelen & Maria-Isabel Gutierrez, 2005. "Do the OECD 24 month horizon growth forecasts for the G7-countries contain information?," Applied Economics, Taylor & Francis Journals, vol. 37(8), pages 855-862.
    14. Sanders, Dwight R. & Manfredo, Mark R., 2003. "USDA Livestock Price Forecasts: A Comprehensive Evaluation," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 28(2), pages 1-19, August.
    15. João Valle e Azevedo & João Tovar Jalles, 2011. "Rational vs. Professional Forecasts," Working Papers w201114, Banco de Portugal, Economics and Research Department.
    16. Croushore Dean, 2010. "An Evaluation of Inflation Forecasts from Surveys Using Real-Time Data," The B.E. Journal of Macroeconomics, De Gruyter, vol. 10(1), pages 1-32, May.
    17. Sanders, Dwight R. & Manfredo, Mark R. & Boris, Keith, 2008. "Accuracy and efficiency in the U.S. Department of Energy's short-term supply forecasts," Energy Economics, Elsevier, vol. 30(3), pages 1192-1207, May.
    18. Kappler, Marcus, 2007. "Projecting the Medium-Term: Outcomes and Errors for GDP Growth," ZEW Discussion Papers 07-068, ZEW - Leibniz Centre for European Economic Research.
    19. Blaskowitz, Oliver J. & Herwartz, Helmut, 2008. "Testing directional forecast value in the presence of serial correlation," SFB 649 Discussion Papers 2008-073, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    20. Dopke, Jorg, 2001. "Macroeconomic forecasts and the nature of economic shocks in Germany," International Journal of Forecasting, Elsevier, vol. 17(2), pages 181-201.
    21. Xie, Zixiong & Hsu, Shih-Hsun, 2016. "Time varying biases and the state of the economy," International Journal of Forecasting, Elsevier, vol. 32(3), pages 716-725.
    22. Keen Meng Choy & Hwee Kwan Chow, 2004. "Forecasting the Global Electronics Cycle with Leading Indicators: A VAR Approach," Econometric Society 2004 Australasian Meetings 223, Econometric Society.
    23. Paulo Júlio & Pedro M. Esperança, 2012. "Evaluating the forecast quality of GDP components: An application to G7," GEE Papers 0047, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Apr 2012.
    24. Graham Elliott & Allan Timmermann, 2016. "Economic Forecasting," Economics Books, Princeton University Press, edition 1, number 10740.
    25. Fullerton, Jr., Thomas M. & Taylor West, Carol A., 1998. "Regional Econometric Housing Start Forecast Accuracy in Florida," The Review of Regional Studies, Southern Regional Science Association, vol. 28(3), pages 15-42, Winter.
    26. Krkoska, Libor & Teksoz, Utku, 2009. "How reliable are forecasts of GDP growth and inflation for countries with limited coverage?," Economic Systems, Elsevier, vol. 33(4), pages 376-388, December.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:nierwp:0098. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Hegardt Grant (email available below). General contact details of provider: https://edirc.repec.org/data/kongvse.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.