Data transparency and GDP growth forecast errors

Abstract

This paper examines the role of data transparency in explaining gross domestic product (GDP) growth forecast errors - the difference between forecasted and realized growth. On average, a one standard deviation increase in the log of a country’s Statistical Capacity Index, a measure of data capacity and transparency, is associated with a decline in absolute forecast errors by 0.44 and 0.49 percentage points for World Bank and International Monetary Fund (IMF) forecasts, respectively. The role of the overall data ecosystem, not just elements related to growth forecasting, is important for forecast accuracy. The study also establishes that forecast errors are large, the Middle East and North Africa region has the largest forecast errors among the world regions, and World Bank forecasts are more accurate and less optimistic than those from the IMF and the private sector.