A Real Time Evaluation of the Central Bank of Chile GDP Growth Forecasts

Money Affairs, Vol. 23, No. 1, pp. 37-73, January-June 2010

34 Pages Posted: 7 Feb 2012

See all articles by Pablo M. Pincheira

Pablo M. Pincheira

Adolfo Ibanez University - School of Business

Date Written: February 7, 2010

Abstract

In this article we evaluate the Central Bank of Chile annual GDP growth forecasts during the period 1991-2009 using a novel real-time database. We compare the Central Bank of Chile forecasts with those of the Survey of Professional Forecasters (SPF), Consensus Forecasts, and simple time-series models. We compare all forecasts to first and final GDP growth vintages. We evaluate a number of different forecast properties, including forecasts accuracy, bias and efficiency. We report mixed results in terms of root mean squared prediction errors. Depending on the sample period, the forecast horizon and the vintage used in the analysis, forecasts from the Central Bank of Chile may outperform the benchmarks or may be outperformed by them. Despite these mixed results, differences in root mean squared prediction errors are in general moderate and with no statistical significance. Furthermore, the only exceptions to these results favor forecasts from the Central Bank of Chile. Despite these findings, our efficiency analysis, in addition to the fact that in some periods the forecasts produced by the Central Bank of Chile have been outperformed by alternative forecasts, opens the question about the room for improvement in the accuracy of the Central Bank of Chile forecasts. While the room for improvement may actually exist, according to the different benchmarks we consider in this article, this room seems to be small.

Keywords: growth forecasts, monetary policy, out-of-sample evaluation, rationality tests, real time evaluation

JEL Classification: C01, C32, C53, E30, E31, E37

Suggested Citation

Pincheira, Pablo M., A Real Time Evaluation of the Central Bank of Chile GDP Growth Forecasts (February 7, 2010). Money Affairs, Vol. 23, No. 1, pp. 37-73, January-June 2010 , Available at SSRN: https://ssrn.com/abstract=2000511

Pablo M. Pincheira (Contact Author)

Adolfo Ibanez University - School of Business ( email )

Diagonal Las Torres 2640
Peñalolén
Santiago
Chile

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