Uncertainty and disagreement in economic forecasting

By Stefania D’Amico, Athanasios Orphanides. 2008

111 citations recorded by the source corpus.

Using the probabilistic responses from the Survey of Professional Forecasters, we study the evolution of uncertainty and disagreement associated with inflation forecasts in the United States since 1968. We compare and contrast alternative measures summarizing the distributions of mean forecasts and forecast uncertainty across individuals at an approximate one-year-ahead horizon. In light of the heterogeneity in individual uncertainty reflected in the survey responses, we provide quarterly estimates for both average uncertainty and disagreement regarding uncertainty. We propose direct estimation of parametric distributions characterizing the uncertainty across individuals in a manner that mitigates errors associated with rounding and approximation of responses when individual uncertainty is small. Our results indicate that higher average expected inflation is associated with both higher average inflation uncertainty and greater disagreement about the inflation outlook. Disagreement about the mean forecast, however, may be a weak proxy for forecast uncertainty. We also examine the relationship of these measures with the term premia embedded in the term-structure of interest rates.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/db99c9efba6272ce2b45b844656766b89f449c0f

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

Citations in the corpus

The ECB Survey of Professional Forecasters (SPF) - A Review After Eight Years' Experience (2007, methodology): “…2001 2002 2003 2004 2005 2006 2007 2008 0.5 1.0 1.5 2.0 2.5 3.0 actual 90% 75% median mean 25% 10% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 0.5 1.0 1.5 2.0 2.5 3.0 0.5 1.0 1.5 2.0 2.5 3.0 actual 90% 75% median mean 25% 10% 25 See for example, Kiley (2000) and D’Amico and Orphanides (2006).”
Comparing the Point Predictions and Subjective Probability Distributions of Professional Forecasters (2009, background): “This phenomenon has also been documented by D’Amico and Orphanides (2006). Rounding is common in surveys that elicit probabilistic expectations. Manski (2004) observes that, when respondents are asked for the ‘‘percent chance’’ that an event will occur, they tend to report values at 1% intervals at ”