Raiders of the Lost High-Frequency Forecasts: New Data and Evidence on the Efficiency of the Fed'S Forecasting

56 Pages Posted: 27 Oct 2020

See all articles by Andrew C. Chang

Andrew C. Chang

Board of Governors of the Federal Reserve System

Trace J. Levinson

Independent

Date Written: October, 2020

Abstract

We introduce a new dataset of real gross domestic product (GDP) growth and core personal consumption expenditures (PCE) inflation forecasts produced by the staff of the Board of Governors of the Federal Reserve System. In contrast to the eight Greenbook forecasts a year the staff produces for Federal Open Market Committee (FOMC) meetings, our dataset has roughly weekly forecasts. We use these new data to study whether the staff forecasts efficiently and whether efficiency, or lack thereof, is time-varying. Prespecified regressions of forecast errors on forecast revisions show that the staff's GDP forecast errors correlate with its GDP forecast revisions, particularly for forecasts made more than two weeks from the start of a FOMC meeting, implying GDP forecasts exhibit time-varying inefficiency between FOMC meetings. We find some weaker evidence for inefficient inflation forecasts.

Keywords: Federal Reserve, Forecast efficiency, Information Rigidities, High frequency forecasts, Preanalysis plan, Preregistration plan, Real-time data

JEL Classification: C53, C82, D79, E27, E37, E58

Suggested Citation

Chang, Andrew C. and Levinson, Trace J., Raiders of the Lost High-Frequency Forecasts: New Data and Evidence on the Efficiency of the Fed'S Forecasting (October, 2020). FEDS Working Paper No. 2020-090, Available at SSRN: https://ssrn.com/abstract=3719448 or http://dx.doi.org/10.17016/FEDS.2020.090

Andrew C. Chang (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Trace J. Levinson

Independent

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