Abstract
AbstractThis work marks a thorough analysis of a confidential real‐time dataset consisting of the Eurosystem/ECB staff macroeconomic projections since their existence. By applying techniques widely employed in the literature of forecast evaluation, we examine their statistical properties with a special emphasis on optimality and rationality. Long‐term GDP projections are biased (tendency to overpredict), do not fully account for available information, and are outperformed by private sector expectations. Inflation projections are optimal and rational on a full‐sample analysis; however, subsample analysis reveals two distinct periods with a persistent and significant bias. Before the financial crisis inflation was persistently underpredicted, while in post‐2013, the bias reverses into overprediction.
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