Working Papers, Konjunkturinstitutet - National Institute of Economic Research
The Accuracy of European Growth and Inflation Forecasts
() and Bharat Barot
Abstract: One-year-ahead forecasts by the OECD and by national
institutes of GDP growth and inflation in 13 European countries are
analysed. RMSE was large: 1.9 % for growth and 1.6 % for inflation. Six
(11) OECD and 10 (7) institute growth forecast 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 was no significant difference in accuracy between
the forecasts of the OECD and the institutes. Two forecasts were found to
be biased and one had autocorrelated errors. Directional forecasts were
significantly better than a naive alternative in one-half of the cases.
Overall, inflation forecasts were significantly more accurate than growth
forecasts, and in contrast to growth forecasts, they generally improved
over time. This has implications for economic policy. Positively biased
revisions reveal large errors in data.
Keywords: Forecast accuracy; Directional errors; Forecast tests; (follow links to similar papers)
44 pages, February 1, 2000
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