DP6594 (Un)Predictability and Macroeconomic Stability
|Author(s):||Antonello D'Agostino, Domenico Giannone, Paolo Surico|
|Publication Date:||December 2007|
|Keyword(s):||Fed Greenbook, forecasting models, predictability, Survey of Professional Forecasts|
|JEL(s):||C22, C53, E37, E47|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=6594|
The ability of popular statistical methods, the Federal Reserve Greenbook and the Survey of Professional Forecasters to improve upon the forecasts of inflation and real activity from naive models has declined significantly during the most recent period of greater macroeconomic stability. The decline in the predictability of inflation is associated with a break down in the predictive power of real activity, especially in the housing sector. The decline in the predictability of real activity is associated with a break down in the predictive power of the term spread.