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on Forecasting |
| By: | Monique Reid; Pierre Siklos |
| Abstract: | Lars Svensson (1997) argued that inflation targeting should be called inflation forecast targeting, capturing the fact that monetary policy is necessarily forward looking. Inflation forecast performance is therefore a critical element for good conduct in monetary policy. As more measures of inflation expectations have become available, it is worth asking whether some are better than others at forecasting inflation and whether the long-held belief that forecast averaging outperforms individual forecasts continues to hold. We consider five sources of inflation forecasts for South Africa, including three unique quarterly surveys of firms, financial analysts and trade unions. We find that a linear combination of forecasts obtained from a factor model can improve the accuracy of forecasting over alternative forms of aggregation. |
| Date: | 2025–03–14 |
| URL: | https://d.repec.org/n?u=RePEc:rbz:wpaper:11077 |
| By: | Lafond, François |
| Abstract: | After a brief history of technological forecasting, I synthesize our work at the Institute for New Economic Thinking over the last decade developing time series models for performance curves. I conclude with ongoing efforts and a research agenda. |
| Keywords: | Performance curves, Experience curves, Diffusion curves, Patent networks |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:amz:wpaper:2025-10 |
| By: | Nicholas Fritsch |
| Abstract: | Bank net interest margins (NIM) have been historically stable in the US on average, but this stability deteriorated in the post-2020 period, particularly in the tails of the distribution. Recent literature disagrees on the extent to which banks hedge interest rate risk, and past literature shows that credit risk and persistence are also important considerations for bank NIM. I use a novel approach to Bayesian dynamic panel quantile regression to document heterogeneity in US bank NIM estimated sensitivities to interest rates, credit risk, and own persistence. I find increased sensitivity to interest rates in the tails of the conditional NIM distribution during the post-2020 period, driven by increased interest rate sensitivities of bank loans and deposits. Density forecast evaluation shows that the model forecasts outperform frequentist benchmark models, and standard tail risk measures show that risks to bank NIM have material implications for bottom-line measures of bank profitability. |
| Keywords: | net interest margins; interest rate risk; Bayesian quantile regression; dynamic panel; density forecasting |
| JEL: | C21 C23 E43 G21 |
| Date: | 2025–03–07 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedcwq:99663 |
| By: | Basil Halperin; J. Zachary Mazlish |
| Abstract: | We use survey data on macroeconomic expectations, across 89 countries and going back to 1989, to establish four facts about how forecast biases depend on the time horizon of the forecast. The data cover average expectations and horizons from 0 to 10 years. (1) Expectations underreact at a horizon of one year or less. (2) Expectations overreact at horizons of two years or more. (3) Expectations are “too extreme” at all horizons. (4) Overreaction and over-extremity increase with forecast horizon. These four patterns hold across advanced and emerging economies, and across multiple macroeconomic variables. They are inconsistent with several popular models of overreaction, where the degree of overreaction is independent of forecast horizon. Finally, although long-term expectations exhibit stronger overreaction, it is short-term expectations that are most strongly associated with fluctuations in GDP, investment, and the stock market. |
| Date: | 2025–04–04 |
| URL: | https://d.repec.org/n?u=RePEc:oxf:wpaper:1076 |
| By: | Natsuki Arai; Shian Chang |
| Abstract: | This paper analyzes the Federal Open Market Committee (FOMC) policymakers' economic projections with identities published after 2007 and presents three sets of results. First, the dispersion of projections across policymakers is associated with the regional economic conditions they represent and their monetary policy preferences. Second, the policymakers' reaction function is consistent with the Taylor rule and satisfies the Taylor principle for stability. Their projections align with Okun's law and the Phillips curve. Finally, the efficiency evaluations to test the unpredictability of forecast errors and revisions indicate that the efficiency is rejected by many policymakers, with rejections concentrated in the years following the Great Recession. |
| Keywords: | FOMC, Individual Projections, Regional Influence, Policy Preference, Forecast Efficiency |
| JEL: | C53 E43 E47 E58 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:gwc:wpaper:2025-003 |