forecast surveys. introduction two philadelphia fed surveys of private-sector forecasters –...
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Forecast Surveys
Introduction
• Two Philadelphia Fed surveys of private-sector forecasters– Livingston Survey– Survey of Professional Forecasters (SPF)
• Provide timely forecasts for policymakers and economic analysts
• Used to answer numerous research questions
Introduction
• Philadelphia Fed economists pushed to have surveys here– Livingston Survey: Don Mullineaux (?)– SPF: Dean Croushore
• Current research department keeps them here & makes them ever more useful– Loretta Mester (research director)– Tom Stark (maestro)
Introduction
• Both surveys– Available to the public at no charge (Fed’s public
education mission)– Used by news media, policymakers, economic
analysts, labor unions, consumers
Introduction
• Livingston Survey– Begun in 1946– Joe Livingston, journalist– 1970s: economists discover survey– 1978: Philadelphia Fed takes over database– 1990: Philadelphia Fed takes over administration
of survey
Introduction
• SPF– ASA/NBER survey begun in 1968– Victor Zarnowitz & other founders– ASA/NBER folds survey in 1990– Philadelphia Fed takes over in 1990– Renamed Survey of Professional Forecasters
What Variables Do the Participants Forecast?Both surveys:
• Nominal GDP• Real GDP• Inflation (CPI)• Unemployment rate• Industrial production
• Interest rate: 3-month T-bills
• Interest rate: 10-year T-notes
• Corporate profits after tax• Housing starts• Business fixed investment
What Variables Do the Participants Forecast?Livingston survey:
• Producer price index• S&P 500 stock prices• Average weekly earnings• Retail trade sales• Auto sales• Prime interest rate
• Average over the next 10 years:– Real GDP growth– CPI inflation rate
What Variables Do the Participants Forecast?SPF:
• GDP price index• Payroll employment• Interest rate: AAA bonds• Remaining GDP
components• Inflation rates:
– CPI excluding food & energy prices (core CPI)
– PCE price index– PCE price index excluding
food & energy prices (core)
• Probability that real GDP will decline
• Distribution forecasts:– Real GDP– GDP price index– Core CPI– Core PCE price index
• Long-term forecasts:– CPI price index– PCE price index
What Variables Do the Participants Forecast?SPF:
• First Quarter:– Long-term projections
• Real GDP growth• Productivity growth• Stock returns• Long-term bond returns• Short-term bond returns
• Third Quarter:– Estimates of natural rate
of unemployment
• Special Questions– Declines in house prices– Effects of stimulus
package– Effect of Y2K
Anonymity
• Both surveys promise anonymity– Can’t match forecaster to a forecast– Allows forecasters to reveal their true forecast,
without attribution– Prevents herding and extreme forecasts
Evaluating the Survey Forecasts
• Are the forecasts accurate?• Statistical tests– Unbiasedness (forecast errors have zero mean)– Efficiency (forecast errors are uncorrelated with
information known when forecast was made)
Evaluating the Survey Forecasts
• Unbiasedness– Over long samples, forecasts of major variables
appear unbiased (Figure 1)
Evaluating the Survey Forecasts
• Unbiasedness– Over long samples, forecasts of major variables
appear unbiased (Figure 1)– Formal statistical tests:
• Test: α = 0, β = 1
tftt YY
Evaluating the Survey Forecasts
• Unbiasedness
– Or:
• Test: α = 0
tftt YY
Evaluating the Survey Forecasts
• Sub-periods show poor performance
Evaluating the Survey Forecasts
• Sub-periods show poor performance• Persistent forecast errors in 1970s and 1990s• Those periods require explanation: failure to
recognize impact of faster money growth; errors in evaluating natural rate of unemployment and rate of potential GDP growth
Evaluating the Survey Forecasts
• Inefficiency with respect to other variables• Test: forecast errors should be uncorrelated
with other variables known when survey was conducted– Example from Ball-Croushore (Figure 3)
Evaluating the Survey Forecasts
• Inefficiency with respect to other variables– Example from Ball-Croushore (Figure 3)– SPF forecasters seem not to change output
forecasts enough in response to change in monetary policy
Evaluating the Survey Forecasts
• Accuracy of probability distribution forecasts– Results from Diebold-Tay-Wallis (1999)• Forecasts are reasonably accurate• But too much probability of a large reduction in
inflation• Persistent inflation forecast errors
Evaluating the Survey Forecasts
• Conclusion– SPF & Livingston survey forecasts fairly accurate—
passing most tests– Some imperfections