The distribution of inflation forecast errors

This paper investigates the cross-sectional distribution of inflation forecasts errors over the period 1984-2007. Our working hypothesis is that the Fed's movement toward greater transparency starting in the mid-1990s likely affected both the distribution of forecast errors and the location of the Fed's staff forecasts within that distribution. This paper builds on earlier work which compared Fed forecasts to the mean or median of private sector forecasts by examining the entire distribution of forecasts. By examining the entire distribution we are able to compare the forecasting record of particular forecasters against a record comprised of randomly assigned forecasts from the Survey of Professional Forecasters. Since the Fed's move toward greater transparency beginning in 1994, its forecasting record is no longer significantly better than the forecasting record comprised of randomly assigned forecasts. (C) 2015 Society for Policy Modeling.

Title	The distribution of inflation forecast errors
Creator	Liebner, Jeffrey
	Smith, Julie K.
	Gamber, Edward
Publisher	Journal of Policy Modeling
Academic Department	Mathematics
Academic Department	Economics
Division	Natural Sciences
Division	Social Sciences
Organization	Lafayette College
Date Issued	2015
Date Available	2018-01-02T19:23:45Z
Type	Article
Language	English
Keyword	Greenbook forecasts
	Inflation forecast errors
	Survey of Professional Forecasters
	Federal Reserve Transparency
Bibliographic Citation	Gamber, E., J. Liebner, and J. K. Smith (2015) "The distribution of inflation forecast errors." Journal of Policy Modeling 37 (1): 47-64.
Standard Identifier	DOI 10.1016/j.jpolmod.2015.01.002
Standard Identifier	Handle 10385/2355
Permalink	http://hdl.handle.net/10385/2355
Rights Statement	In Copyright
Rights Holders	Society for Policy Modeling