Fed forecasts overcompensate for trend deviations, paper says

A growth arrow

The Federal Reserve tends to be overly optimistic about growth prospects when the economy is running below trend and overly pessimistic when it is above trend, according to a recent Fed working paper.

The Fed’s Asymmetric Forecast Errors, by Andrew Chang, assesses the Fed’s “greenbook” forecasts of the economy using conditional probabilities. Chang writes that conventional forecast testing methods, such as root mean squared error, can struggle to account for the “well known” psychological

To continue reading...

You need to sign in to use this feature. If you don’t have a Central Banking account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an indvidual account here: