Federal Reserve Bank of Boston Economic Quiz
Economic Forecasting: Science or Intuition
Forecasts of macroeconomic variables receive a considerable amount of media attention, especially around turning points in the business cycle. One such source for these forecasts is the Wall Street Journal, which publishes a panel of predictions for real GDP growth and other variables in January and July of each year.
1. The negative real GDP growth for 2001:Q1 and 2001:Q2 took some economists by surprise. Out of the 56 forecasters in the January 2001 Wall Street Journal survey, how many forecasters correctly predicted negative real GDP growth for these two quarters?
2. What was the average real GDP forecast error for 2001:Q2 over all of the forecasters in the January 2001 survey? (forecast error = actual value - forecast)
3. Gary Shilling, one of the forecasters in the WSJ survey, is known for his consistently pessimistic outlook. Over the course of his stint on the forecasting panel, he has made 74 predictions of real GDP growth. Out of these 74 predictions, how many times has he predicted a period of negative real GDP growth, and how many times has he been right?
4. The Wall Street Journal survey includes 6-month ahead forecasts of unemployment, 3-month Treasury bill rates, and 30-year Treasury bond rates. Which of these variables had the most volatile actual values for the period 1990-2001 (based on standard deviations), and also the largest average forecast error?
3-Month Treasury bill rate
30-Year Treasury bond rate
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Economic quiz written by: Jennifer Young - October 21, 2002
Views expressed in the economic quiz are those of the individual author.