A Directional Analysis of Japanese GDP Forecasts Made by Corporate Executives

Abstract

We investigate the directional accuracy of GDP forecasts by corporate executives. Extending the literature to business leader’s forecasts, our findings show positive evidence for the usefulness of long-term forecasts whereas past literature casts doubt on their usefulness. However, examination of sub-samples shows that the forecasts are useful in the moderate-growth period (1991-2010) but not in the high-growth period (1974-1990). In the moderate-growth period, using not only the long-term forecast but also the short-term forecast improves forecast accuracy. The usefulness of the forecast is robust to data vintages whereas this issue has been hardly examined thoroughly.

Keywords: Forecast evaluation, directional analysis, forecast accuracy, macroeconomic forecast

JEL Classification: E37, C53, E17