Geography or Skills: What Explains Fed Watchers' Forecast Accuracy of US Monetary Policy?
32 Pages Posted: 12 Feb 2007
There are 2 versions of this paper
Geography or Skills: What Explains Fed Watchers' Forecast Accuracy of Us Monetary Policy?
Date Written: January 2007
Abstract
The paper shows that there is a substantial degree of heterogeneity in forecast accuracy among Fed watchers. Based on a novel database for 268 professional forecasters since 1999, the average forecast error of FOMC decisions varies 5 to 10 basis points between the best and worst-performers across the sample. This heterogeneity is found to be related to both the skills of analysts - such as their educational and employment backgrounds - and to geography. In particular, there is evidence that forecasters located in regions which experience more idiosyncratic economic conditions perform worse in anticipating monetary policy. Moreover, systematic forecaster heterogeneity is economically important as it leads to greater financial market volatility after FOMC meetings. Finally, Fed communication may exert an influence on forecast accuracy.
Keywords: monetary policy, forecast, Federal Reserve, FOMC, geography, skills, heterogeneity, survey data, communication, United States
JEL Classification: E52, E58, G14
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Transparency and Credibility: Monetary Policy with Unobservable Goals
By Jon Faust and Lars E. O. Svensson
-
Social Value of Public Information: Morris and Shin (2002) is Actually Pro Transparency, Not Con
-
Transparency of Information and Coordination in Economies with Investment Complementarities
-
Transparency of Information and Coordination in Economies with Investment Complementarities
-
Efficient Use of Information and Social Value of Information