An Evaluation of Inflation Forecasts from Surveys Using Real-Time Data

44 Pages Posted: 8 Nov 2006

See all articles by Dean Croushore

Dean Croushore

University of Richmond - E. Claiborne Robins School of Business

Date Written: October 2006

Abstract

This paper carries out the task of evaluating inflation forecasts from the Livingston Survey and the Survey of Professional Forecasters, using the real-time data set for macroeconomists as a source of real-time data. The author examines the magnitude and patterns of revisions to the inflation rate based on the output price index and describe what data to use as "actuals" in evaluating forecasts. The author then runs tests on the forecasts from the surveys to see how good they are, using a variety of actuals. The author finds that much of the empirical work from 20 years ago was a misleading guide to the quality of forecasts because of unique events during the earlier sample period. Repeating that empirical work over a longer sample period shows no bias or other problems in the forecasts. The use of real-time data also matters for some key tests on some variables. If a forecaster had used the empirical results from the late 1970s and early 1980s to adjust survey forecasts of inflation, forecast errors would have increased substantially.

Keywords: Inflation, Forecasting, Real-time data

Suggested Citation

Croushore, Dean, An Evaluation of Inflation Forecasts from Surveys Using Real-Time Data (October 2006). FRB of Philadelphia Working Paper No. 06-19, Available at SSRN: https://ssrn.com/abstract=940418 or http://dx.doi.org/10.2139/ssrn.940418

Dean Croushore (Contact Author)

University of Richmond - E. Claiborne Robins School of Business ( email )

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