Has The Accuracy of Macroeconomic Forecasts for Germany Improved?

Authors


  • Dedicated to the memory of Victor Zarnowitz (3 November 1919–21 February 2009) a great economist, a sceptic on economic forecasting and a good friend to both authors.

Address for correspondence: Ullrich Heilemann, Institut für Empirische Wirtschaftsforschung, Universität Leipzig, Grimmaische Straße 12, 04105 Leipzig, Germany. Tel.: +49173 255 1403; fax: +49341 197 33789; e-mail: heilemann@wifa.uni-leipzig.de

Summary

This study asks whether the accuracy of macroeconomic forecasts for Germany has improved over time. We examine one-year-ahead forecasts of rates of real GDP growth and inflation for the years 1967–2010, by three major German forecasters and the OECD. We find that overall error levels are high but not much different from those of the U.S. and U.K. In the 1980s and 1990s accuracy improved somewhat, but has now returned to its 1970s level, indicating that it reflects the variance of growth and inflation. Benchmark comparisons with these predictions with ex post forecasts of a macroeconometric model indicate that accuracy can be improved, but it will be difficult to achieve.

Ancillary