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Since November 2007, the Federal Open Market Committee (FOMC) of the U.S. Federal Reserve has regularly published participants' qualitative assessments of the uncertainty attending their individual forecasts of real activity and inflation, expressed relative to that seen on average in the past. The benchmarks used for these historical comparisons are the average root mean squared forecast errors (RMSEs) made by various private and government forecasters over the past twenty years. This paper documents how these benchmarks are constructed and discusses some of their properties. We draw several conclusions. First, if past performance is a reasonable guide to future accuracy, considerable uncertainty surrounds all macroeconomic projections, including those of FOMC participants. Second, different forecasters have similar accuracy. Third, estimates of uncertainty about future real activity and interest rates are now considerably greater than prior to the financial crisis; in contrast, estimates of inflation accuracy have changed little. Finally, fan charts--constructed as plus-or-minus one RMSE intervals about the median FOMC forecast, under the expectation that future projection errors will be unbiased and symmetrically distributed, and that the intervals cover about 70 percent of possible outcomes--provide a reasonable approximation to future uncertainty, especially when viewed in conjunction with the FOMC's qualitative assessments. That said, an assumption of symmetry about the interest rate outlook is problematic if the expected path of the federal funds rate is expected to remain low. [ABSTRACT FROM AUTHOR]

This paper examines the use and abuse of "real-time" data in economic forecasting. The authors distinguish between three different ways of using real-time data to estimate forecasting equations and argue that the most frequently used approach should generally be avoided. The authors attempt to prove their theory with a model that uses monthly observations of industrial production, employment, and retail sales to predict real gross domestic product (GDP) growth. When the model is estimated using the preferred method, its out-of-sample forecasting performance is clearly superior to that obtained using conventional estimation, and compares favorably with that of the Blue-Chip consensus. This working paper can be found at the United States Federal Reserve Board's International Finance Discussion Papers. You can access it by going to http://www.federalreserve.gov/pubs/ifdp/.

This paper presents a dynamic general equilibrium model where agents use conflicting levels of sophistication when they forecast economic conditions. All agents resolve standard dynamic optimization problems and confront strategic complementarity in production, but some resolve their inference problems based on simple forecasting rules of thumb. The author shows that even a minority of rule-of-thumb forecasters can have a considerable effect on the aggregate properties of the economy. The author suggests that as agents try to forecast each other's behavior, they effectively reinforce the internal propagation mechanism of the economy. Analysis highlights the role of strategic complementarity in the heterogeneous expectations literature and analyzes many qualitative claims about the aggregate implications of expectational heterogeneity. This working paper is available at the US Federal Reserve Board. You can access this site by going to www.federalreserve.gov/pubs/workingpapers.htm.

This paper proposes a framework design and post evaluation analysis for economic forecasts. This framework is illustrated by re-examining mean square forecast errors from dynamic models and nonlinearity biases of US external trade. Previous studies examined properties of nonlinearity bias and the possible nonmonotonicity and nonexistence of mean square forecast errors separate from other aspects of the forcasting process. This resulted in inefficient forecasting. This working paper can be found at the US Federal Reserve Board's International Finance Discussion Papers. You can access this by going to

The author presents a framework for estimating parameters in a variety of rational expectations (RE) models. The framework includes least squares, maximum likelihood, and band restricted maximum likelihood as unique cases. This framework recognizes that dynamic RE models are frequently meant to match the data in limited ways. This paper designs a frequency domain version of general estimation. The author discusses the advantages over traditional general estimation. The paper builds on Diebold, Ohanian and Berkowitz (1995) who suggest techniques for estimating and evaluating dynamic rational expectations models in the frequency domain. This working paper is available at the US Federal Reserve Board. You can access this site by going to www.federalreserve.gov/pubs/workingpapers.htm.

Finance and economics provide many examples of securities that have values greater than those of their payoffs in the finite future. This paper defines rational bubbles to be securities with payoffs occurring in the infinitely distant future and investigates the behavior of bubble values. The authors extend their analysis to a setting of uncertainty. They interpret the money account in an arbitrage-free asset model as the value of a particular bubble. The authors present three applications of this characterization of bubbles. This working paper is available at the US Federal Reserve Board. You can access this site by going to www.federalreserve.gov/pubs/workingpapers.htm.

We propose a novel approach to estimate household income uncertainty at various future horizons, and characterize how the estimated uncertainty evolves over the life cycle. We measure income uncertainty as the variance of linear forecast errors conditional on information available to households prior to observing the realized income. This approach is semiparametric because we impose essentially no restrictions on the statistical properties of the forecast errors. Relative to previous studies, we find lower and less persistent income uncertainties that call for a life cycle consumption profile with a less pronounced hump. [ABSTRACT FROM AUTHOR]

The article reports on the economic forecasting in Mexico. It is said that the U.S. which accounts for over 80% of Mexico's exports will fall into recession in the first half of 2008 but a slow recovery of U.S. domestic demand is expected in 2009. Moreover, Mexico's economy is also expected to grow by just 1.9% in 2008 and 3% in 2009. Furthermore, the paper offers a brief discussion on the forecast of Mexico's economic growth, inflation, exchange rates and external sector.

Was the high inflation of the 1970s mostly due to incomplete information about the structure of the economy (an unavoidable mistake as suggested by Orphanides, 2000)? Or, to weak reaction to expected inflation and/or excessive policy activism that led to indeterminacies (a policy mistake, a scenario suggested by Clarida, Gali and Gertler, 2000)? We study this question within the NNS model with policy commitment and imperfect information, requiring that the model have satisfactory overall empirical performance. We find that both explanations do a good job in accounting for the great inflation. Even with the commonly used specification of the interest policy rule, high and persistent inflation can occur following a significant productivity slowdown if policymakers significantly and persistently underestimate ‘core’ inflation. [ABSTRACT FROM AUTHOR]

Exchange rate forecasting is hard and the seminal result of Meese and Rogoff (1983) that the exchange rate is well approximated by a driftless random walk, at least for prediction purposes, has never really been overturned despite much effort at constructing other forecasting models. However, in several other macro and financial forecasting applications, researchers in recent years have considered methods for forecasting that combine the information in a large number of time series. One method that has been found to be remarkably useful for out-of-sample prediction is simple averaging of the forecasts of different models. This often seems to work better than the forecasts from any one model. Bayesian Model Averaging is a closely related method that has also been found to be useful for out-of-sample prediction. This starts out with many possible models and prior beliefs about the probability that each model is the true one. It then involves computing the posterior probability that each model is the true one, and averages the forecasts from the different models, weighting them by these posterior probabilities. This is effectively a shrinkage methodology, but with shrinkage over models not just over parameters. I apply this Bayesian Model Averaging approach to pseudo-out-of-sample exchange rate forecasting over the last ten years. I find that it compares quite favorably to a driftless random walk forecast. Depending on the currency-horizon pair, the Bayesian Model Averaging forecasts sometimes do quite a bit better than the random walk benchmark (in terms of mean square prediction error), while they never do much worse. The forecasts generated by this model averaging methodology are however very close to (but not identical to) those from the random walk forecast. [ABSTRACT FROM AUTHOR]

This chapter examines the effects of fiscal consolidation--tax hikes and government spending cuts--on economic activity. Based on a historical analysis of fiscal consolidation in advanced economies, and on simulations of [...]

Recent Developments: Global Expansion Loses Steam Following a broad-based upswing in cyclical growth that lasted nearly two years, the global economic expansion decelerated in the second half of 2018. Activity [...]

World growth strengthened in 2017 to 3.8 percent, with a notable rebound in global trade. It was driven by an investment recovery in advanced economies, continued strong growth in emerging [...]

We analyze the evolution of macroeconomic uncertainty in the United States, based on the forecast errors of consensus survey forecasts of various economic indicators. Comprehensive information contained in the survey forecasts enables us to capture a real-time subjective measure of uncertainty in a simple framework. We jointly model and estimate macroeconomic (common) and indicator-specific uncertainties of four indicators, using a factor stochastic volatility model. Our macroeconomic uncertainty has three major spikes aligned with the 1973{75, 1980, and 2007{09 re-cessions, while other recessions were characterized by increases in indicator-specific uncertainties. We also show that the selection of data vintages affects the estimates and relative size of jumps in estimated uncertainty series. Finally, our macroeconomic uncertainty has a persistent negative impact on real economic activity, rather than producing "wait-and-see" dynamics. [ABSTRACT FROM AUTHOR]

The article presents an economic growth outlook for Finland in the midst of inflation for the period 2009-2016. It details an inflationary projection which will continue to elevate in the upcoming quarters due to indirect tax increases. It highlights the producer price inflation pushed by import prices from the weak demands in various sectors such as electronics, printing paper, and forest products.

The article provides an energy outlook for China as of February 2015 in the context of its immense energy need for imported energy and its implications for the global energy market. Topics discussed include China's natural resource endowment, current macroeconomic trends affecting energy sector, and how market reforms, domestic and international politics will impact China's energy production and demands.

This publication presents information on Canada as of November 2013. It provides an outlook for 2014-2018 for Canada's politics, election, international relational, economic policy, fiscal policy, monetary policy, economic growth, inflation and exchange rates. Data and charts are also provided including the annual, quarterly and monthly economic data, annual, quarterly and monthly trends and comparative economic indicators.

The article presents an economic forecast for several Asian countries in 2013. It mentions that Indian mining companies will experience tremendous growth especially those in pursuit of coal, copper and iron ore because of both rapid growth and strict regulation in domestic investment opportunities. It adds that the Pakistan economy will continue to experience budgetary deficit until 2017, which can bring deterioration to the country's finances.

The article forecasts the economic performance of Russia for 2012-2016 with regards to its international assumptions and economic growth. It mentions that the country's economy will remain dependent on international commodity prices and asserts that it has expanded robustly in 2011 due to strong private consumption growth. It states that inflation slowed down because of falling food prices and affirms that it has experienced a weakening of its currency due to uncertaint global outlook.

The article forecasts the economic conditions in Brazil from 2012-2016. The country's monetary policy moderation and tax breaks will still indicate a struggle in the gross domestic product (GDP) growth rate. It predicts that by late 2012 GDP grows by over 4.5% on annualised basis that provides momentum into 2013 and accelerates to 5% in 2014 marked by fiscal spending ahead of the year's presidential election. It also expects an expansion on most sectors to the overall GDP growth.

The article forecasts the economic condition of Norway from 2011-2016. The economic growth recovery of the country is expected to slow slightly at 0.9% in 2012 and 1.4% in 2013 due to the impact of lessened export demand and uncertainty to the real gross domestic product (GDP). It predicts that its exchange rate will remain strong despite attempts in maintaining the competitiveness of its exports. Its account is also expected to be comfortable in surplus for the whole forecast period.

The article presents an economic forecast for Serbia for 2012-2016. It mentions the sharp decline in economic activity in Serbia in the second half of 2011 which mirrors the worsening in German and European demand. It forecasts a real gross domestic product (GDP) growth of 0.7% in 2012 and is expected to pick up in 2013-2016 to an average of 3.6%. It also mentions the impact of the crisis in euro zone as well as economic status of the country in terms of inflation and exchange rates.

The article presents an economic forecast on Kuwait including its economic growth, international assumptions and inflation rates. It mentions that growth in fixed investment was dampened by political instability in 2011 and asserts that legislation such as the privatisation law which is designed to encourage private-sector investment in the economy has already been implemented. It states that imports rose by over 10% in 2010 and states that oil export earnings rose by 26%.

This publication offers information on Venezuela. It provides an economic and political outlook for the country for the period 2012-2016. A monthly review of its political situation, economic policy and economic performance for January 2012 is offered. Also included are annual, quarterly and monthly data and charts concerning its economy.

The article forecasts the economic conditions in Latvia from 2012-2016. The country's real gross domestic product (GDP) has declined in 2009-2010 but has recovered by the second half of 2010 with a strong industrial growth driven by external demand. It predicts a contraction of real GDP in the euro zone in 2012 and expects annual growth to strengthen from 2013 and 2014. It also sees a high risk of a renewed global recession and a break-up of the euro zone.

The article presents an economic forecast for Turkey for 2012 to 2016. It anticipates the slowdown of economic growth to 3.5 percent in 2012 resulting from the weak global economy and market turmoil in Turkish lira, as well as in consumer and investor confidence. Moreover, charts are presented depicting a forecast on the economic growth rate of various economic indicators including gross domestic product, private consumption, and world trade.

The article offers an economic outlook for Pakistan for 2012-2016. It expects gross domestic product (GDP) to increase to 3.8% in 2011-2012. It notes that economic expansion will still be driven by growth in private consumption, which is forecast to average 5.1%. The low levels of investment in human capital has made it unlikely for Pakistan to benefit from demographic demand. Information on inflation and exchange rates is also provided.

The article discusses an economic forecast for Bulgaria from 2012 to 2016. A chart showing international economic assumptions from 2011 to 2016 is presented. The estimated growth rate of Bulgaria's gross domestic product (GDP), which has been affected by weakening export demand, is 1.9% in 2011 and 1.36% in 2012. The country's inflation is expected to rise from 2.4% in 2010 to 4.1% in 2011 because of high food prices.

The article offers forecast on the economy of Russia from 2012-2016. It states that prospects for growth will stay dependent on global commodity prices. It predicts that average oil prices will remain comparatively high during the period, although lower compared in 2011. It adds that growth of real gross domestic product (GDP) in the country will average approximately four percent per year in 2012-2016.

The article offers information about the economic forecast for Indonesia. It mentions that the private consumption will remain a major force of gross domestic product (GDP) growth, which will expand by 5.3% annually on average in 2012-2016. Moreover, it notes that the rate of inflation will decline to 4.9% in 2012 concerning the slight domestic economic downturn and lower prices of international commodity.

The article presents the economic forecast in Japan for 2012-2016. It states that the country's north-eastern coast will take years for economic recovery due to earthquake and tsunami damage in infrastructure in March 2011. It says that the consumer price inflation which forecasted to average 0.35 in 2011 is owing to supply-side factors. Moreover, it forecasts the exchange rate to average 79.2 Yen: 1 U.S. dollar in 2011 and 75 Yen: 1 U.S. dollar in 2012.

The article presents a 2012-2016 economic forecast for Brazil. It states that growth of the country's gross domestic product (GDP) will remain to be supported by real wage growth, expanding labour force, and credit expansion. It says that inflation is expected to be eased by weakening global and local economy. It adds that an increase in the current-account deficit is also predicted, reaching 3.2% annual average of GDP in 2012-2016.

The article presents a 2012-2016 economic forecast for France. It states that after a growth in the first quarter of 2011, France's real gross domestic product (GDP) became flat in the second quarter of the same year. It says that in August 2011, there was a slight increase in the consumer price inflation. It adds that because of the developments in the U.S. and in the euro zone, the euro will demonstrate significant volatility.

The article focuses on the economic forecast for Japan from 2011-2016. It says that the north-eastern coast of the country will recover from the destruction caused by the earthquake and tsunami in March 2012. It states that revisions to gross domestic product (GDP) figures for the second quarter show that the economy concentrated more than the government had expected, which shrinks by 0.5% quarter on quarter. It adds that GDP will grow up to 2.3% in 2012.

The article forecasts the economic condition of Argentina from 2011-2016. It is expected that the country's gross domestic product (GDP) will increase. It notes that manufacturing and agriculture will continue to become the primary contributors to the growth of the sector. It also predicts that the existing account of its external sector will move into a small deficit in 2012.

The article presents an economic forecast for Latvia. Its real gross domestic product (GDP) has been recovering since the second half of 2010 as industrial production has been growing strongly. Latvia will continue benefiting from the robust performance in Sweden, Russia and other Baltic states whose economies will be affected by the slowdown in global economy. A small current-account deficit is estimated in 2011 although stronger domestic demand from 2012 is seen to widen the deficit.

The article presents the forecast for the economy of Japan. The relief and reconstruction work will sustained the growth of government consumption in 2011-2012, but will fall back in 2013-2015. The current-account sector of Japan will be dented by the extra imports needed by the country to make up shortages and facilitate reconstructions following the earthquake and tsunami in March 2011. Moreover, the strength of the yen will partly neutralize the upward pressure on domestic prices in 2011.

The article presents an economic forecast for Japan for 2010-2015. It discusses the country's international assumptions in terms of its gross domestic product, exchange rates, and financial indicators. It states that the north-east coast of the country will take years to recover from the earthquake and tsunami disaster in March 2011.

The article offers an economic forecast for Japan from 201-2015. It states that the earthquake and tsunami that struck the country on March 11, 2011 will cause the decline in the gross domestic product (GDP) growth during the second quarter of 2011. It mentions that relief and reconstruction work will increase government consumption in 2011-2012. It adds that exports will rise along with the expansion of imports in 2011-2015.

The article presents an economic forecast for 2011-2015 in Belgium from Economist Intelligence Unit Ltd. The country has been anticipated to contribute to the general slowdown in the euro area in 2011. The unemployment, social security benefits, and the public and private sector salaries have been anticipated to grow due to the increase of the health index.

The article forecasts the economic policy of Japan from 2011-2015. It estimates that costs of rescue and reconstruction operations following the earthquake and tsunami on March 11, 2010 could amount to 4% of gross domestic product (GDP) over several years. It anticipates that interest rates of the Bank of Japan (BOJ) will increase until the second half of 2012.

The article presents a country report for the political and economic state of Greece from 2011 to 2015. It provides basic data that can support the forecasts about its political structure during the mentioned time frame. The author predicts that the country will experience unrest in the business sector which can threaten the stability of its political system as the Greek government enact its austerity agreement with the European zone and International Monetary Fund (IMF).

The article presents an economic forecast and comparative data from 2010 to 2015 in South Korea as revealed by Economist Intelligence Unit Ltd. It has been analyzed that the 6.2 percent growth in the real gross domestic product (GDP) is due to the increase in private consumption, and strong investment. The recovery in domestic demand and the increase in global oil and food prices will affect the inflation rate in 2011.

The article presents an economic forecast for Malaysia in 2011-2015. It says that Malaysian economy is anticipated to move on to an even stable growth path in 2011-2015, when growth of real gross domestic product (GDP) is expected to average 5.3% annually. It adds that Malaysia will keep on posting large current-account surpluses. It sates that consumer price inflation, however, will accelerate to 3.1% average rate in 2011 and price increases will subsequently average 3.6% per year in 2011-2015.

The article presents an economic forecast for Hungary from 2010 to 2015 by the Economist Intelligence Unit Ltd. (EIU). EIU forecasts that the country's gross domestic product (GDP) will increase by 3 to 3.5% from 2012 to 2015. EIU expects a slow growth in the country's government spending during the given forecast period. Several charts depicting the forecasts of the country's economy are also given.

The article presents a forecast for the economic policy in Germany from the Economist Intelligence Unit Ltd. The primary economic policy of the government focuses on the elimination of the fiscal deficit over a four-year time period. The European Central Bank (ECB) has been anticipated to keep the one percent record and 0.25 percent deposit rate until mid-2012.

The article focuses on the political outlook for Russia for the month of January 2011. It says that the speech of Russian President Dmitry Medvedev on November 30, 2009 that focuses on pensioners and children is made to win favour with a swath of the electorate that worries less on political reform. It adds that the economic performance of Russia will improve in the fourth quarter of 2011. Meanwhile, several graphs are presented which show industrial production, retail trade, and agriculture.

The article focuses on the political and economic outlook for Russia from 2011 to 2015. It states that the next parliamentary election in Russia is scheduled for late 2011 and the presidential poll is scheduled for 2012. It also mentions that there are some positive developments that will be possible in 2011-2015 such as the membership of the World Trade Organisation (WTO), the progress on privitisation, and some liberalisation of the foreign investment industry.

The article focuses on the economic forecasting in Brazil. It says that the credit expansion has driven the continuation of the growth of gross domestic product (GDP) which was contributed by the economic slowdown occurred in April to August 2010. It states that the recovery in the domestic demand growth will be contributed by the failure to contain the public spending. It adds that the current-account deficit is anticipated to increase because the exports was outperformed by the import trade.