Why can’t professional macroeconomic forecasters predict recessions?
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López Pérez, VíctorÁrea de conocimiento
Economía AplicadaPatrocinadores
I am grateful to Funcas, and in particular to María Jesús Fernández Sánchez, for providing the dataset and for very helpful technical assistance. I thank David Gabauer, Ayaz Zeynalov and participants to the 9th International Conference in Economics (Econworld 2019, Seville, Spain) for interesting comments and discussions. I am also grateful to Susana Tena Nebot for excellent research assistance.Fecha de publicación
2019-05-23Cita bibliográfica
LÓPEZ PÉREZ, V. Why can’t professional macroeconomic forecasters predict recessions?. Comunicación en congreso. Ninth International Conference in Economics. Fac. Ciencias del Trabajo. UNIVERSIDAD DE SEVILLA. 2019Palabras clave
FuncasForecast errors
Professional Forecasters
Expected GDP growth
Forecast revisions
Resumen
The professional forecasters’ inability to anticipate macroeconomic recessions is well documented. The literature has found that aggregate or consensus forecasts are too optimistic before downturns and too pessimistic before recoveries. This paper explores whether this result also holds at the individual level or is the result of an aggregation bias. Using a Spanish survey of professional forecasters conducted by Funcas, I find that individual forecasters are indeed too optimistic before recessions. The reason is not that they become inattentive when the economy is in good shape. Instead, they put too much weight on the most recent developments when producing their forecasts. The analysis of their forecast revisions reveals that better-than-expected data makes some forecasters to revise their forecasts upwards too much. These revisions raise the consensus forecast and trigger a herd behaviour by other forecasters, who also revise up their forecasts. Both factors lead to subsequent negative ...
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