Uncertainty Measures from Partially Rounded Probabilistic Forecast Surveys

49 Pages Posted: 23 Jan 2020 Last revised: 27 Feb 2020

See all articles by Alexander Glas

Alexander Glas

University of Nuremberg-Erlangen

Matthias Hartmann

Alfred-Weber-Institut

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Date Written: January 13, 2020

Abstract

Although survey-based point predictions have been found to outperform successful forecasting models, corresponding variance forecasts are frequently diagnosed as heavily distorted. Forecasters who report inconspicuously low ex-ante variances often produce squared forecast errors that are much larger on average. In this paper, we document the novel stylized fact that this variance misalignment is related to the rounding behavior of survey participants. Rounding may reflect the fact that some survey participants employ a rather judgmental approach to forecasting as opposed to using a formal model. We use the distinct numerical accuracies of panelists’ reported probabilities as a means to propose several alternative and easily implementable corrections that i) can be carried out in real time, i.e., before outcomes are observed, and ii) deliver a significantly improved match between ex-ante and ex-post forecast uncertainty. According to our estimates, uncertainty about inflation, output growth and unemployment in the U.S. and the Euro area is higher after correcting for the rounding effect. The increase in the share of non-rounded responses in recent years also helps to understand the trajectory of survey-based average uncertainty during the years since the financial and sovereign debt crisis.

Keywords: survey data, probabilistic forecasting, rounding, macroeconomic uncertainty

JEL Classification: C32, C52, C53, C83

Suggested Citation

Glas, Alexander and Hartmann, Matthias, Uncertainty Measures from Partially Rounded Probabilistic Forecast Surveys (January 13, 2020). University of Milan Bicocca Department of Economics, Management and Statistics Working Paper No. 427, Available at SSRN: https://ssrn.com/abstract=3522499 or http://dx.doi.org/10.2139/ssrn.3522499

Alexander Glas

University of Nuremberg-Erlangen ( email )

Lange Gasse 20
Nuremberg, 90403
Germany
+49 911 5302-278 (Phone)

Matthias Hartmann (Contact Author)

Alfred-Weber-Institut ( email )

Bergheimer Straße 58
Heidelberg, 69117
Germany

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