What do professional forecasters actually predict?

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  • Didier Nibbering, Erasmus University Rotterdam
  • ,
  • Richard Paap, Erasmus University Rotterdam
  • ,
  • Michel van der Wel

This paper studies what professional forecasters predict. We use spectral analysis and state space modeling to decompose economic time series into trend, business cycle, and irregular components. We examine which components are captured by professional forecasters by regressing their forecasts on the estimated components extracted from both the spectral analysis and the state space model. For both decomposition methods, we find that, in the short run, the Survey of Professional Forecasters can predict almost all of the variation in the time series due to the trend and the business cycle, but that the forecasts contain little or no significant information about the variation in the irregular component.

Original languageEnglish
JournalInternational Journal of Forecasting
Volume34
Issue2
Pages (from-to)288-311
Number of pages24
ISSN0169-2070
DOIs
Publication statusPublished - Apr 2018
Externally publishedYes

    Research areas

  • Baxter-King filter, Expert forecast, Forecast evaluation, State space modeling, Survey of professional forecasters, Trend-cycle decomposition

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