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Behavior Biases in Macroeconomic Forecasting

Author

Listed:
  • Henry Nasses
  • Rodrigo De Losso

Abstract

This paper documents the optimism in the projection of GDP and IPCA. That is, it shows that GDP projections are systematically higher than what actually happens, and IPCA projections are systematically lower. Then it tests whether there are institutional incentives for the behavior of professionals who make such projections. Finally, it verifies whether the revision of the projections still carries the previously identified bias. The results confirm the existence of an optimistic bias in the GDP and IPCA projections and this bias remains in the following revisions. However, there seems to be no institutional incentive for this behavior

Suggested Citation

  • Henry Nasses & Rodrigo De Losso, 2020. "Behavior Biases in Macroeconomic Forecasting," Working Papers, Department of Economics 2020_23, University of São Paulo (FEA-USP).
    • Handle: RePEc:spa:wpaper:2020wpecon23
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    File URL: http://www.repec.eae.fea.usp.br/documentos/Nasses_Losso_23WP.pdf
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    More about this item

    Keywords

    Biases; Behavioral Economics; Behavioral Finance; forecast; GDP; inflation; Boletim Focus;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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