Are Economic Forecasters Too Confident in Their Predictions? 📊

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Summary:

  1. Overestimation of Long-Term Accuracy
    The Federal Reserve Bank of New York’s study shows that professional forecasters often overestimate their accuracy for long-term predictions, with actual errors being two to four times larger than their estimated uncertainty ranges.

  2. Underestimation of Short-Term Precision
    For short-term forecasts (less than three months), forecasters typically overestimate potential errors, suggesting a misjudgment in their predictive accuracy.

  3. Variability and Model Dependence
    The study points to significant variability in uncertainty estimates among forecasters and challenges the rational expectations theory, attributing discrepancies to differences in forecasting models and assumptions.

Read more at: New York Fed