Forecast Disagreement about Long-run Macroeconomic Relationships

52 Pages Posted: 23 Jun 2020

See all articles by Pei Kuang

Pei Kuang

University of Birmingham

Li Tang

University of Essex

Renbin Zhang

Shandong University

Tongbin Zhang

Shanghai University of Finance and Economics

Date Written: May 29, 2020

Abstract

Using survey forecast data, we study if professional forecasters utilize long-run co-integration relationships among macroeconomic variables to forecast future as postulated in workhorse stochastic growth models. There exists a significant heterogeneity among forecasters, the majority of whom do not use these long-run relationships and generally make more accurate forecasts (comparing with those who use). Simple parsimonious recursive forecasting models are fitted to the data as one way to approximate the expectation formation process of the forecasters who utilize (or do not utilize) the long-run relationships.

Keywords: Survey Expectation, Co-Integration, Forecast Disagreement, Accuracy

JEL Classification: D84, G22, O41

Suggested Citation

Kuang, Pei and Tang, Li and Zhang, Renbin and Zhang, Tongbin, Forecast Disagreement about Long-run Macroeconomic Relationships (May 29, 2020). Available at SSRN: https://ssrn.com/abstract=3614426 or http://dx.doi.org/10.2139/ssrn.3614426

Pei Kuang

University of Birmingham ( email )

Edgbaston, Birmingham B15 2TT
United Kingdom

Li Tang

University of Essex ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

Renbin Zhang

Shandong University ( email )

shanda nanlu 27
jinan, Shandong 250100
China

Tongbin Zhang (Contact Author)

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

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