Abstract
In this paper, we evaluate macroeconomic forecasts for Austria and analyze the effects of external assumptions on forecast errors. We consider the growth rates of real GDP and the demand components as well as the inflation rate and the unemployment rate. The analyses are based on univariate measures like RMSE and Theil’s inequality coefficient and also on the Mahalanobis distance, a multivariate measure that takes the variances of and the correlations between the variables into account. We compare forecasts generated by the two leading Austrian economic research institutes, the Institute for Advanced Studies (IHS) and the Austrian Institute of Economic Research (WIFO), and additionally consider the forecasts produced by the European Commission. The results indicate that there are no systematic differences between the forecasts of the two Austrian institutes, neither for the traditional measures nor for the Mahalanobis distance. Generally, forecasts become more accurate with a decreasing forecast horizon, as expected; they are unbiased for forecast horizons of less than a year considering traditional measures and for the shortest forecast horizon considering the Mahalanobis distance. Finally, we find that mistakes in external assumptions, in particular regarding EU GDP and the oil price, translate into forecast errors for GDP and inflation.
Highlights
Macroeconomic forecasts provide important information for economic policy makers, companies and private households
Starred figures indicate that the null hypothesis is rejected at the 5% significance level and that IHS and WIFO forecasts show different levels of accuracy means that the respective forecast error is twice the error of the best forecast for the respective variable
Starred figures indicate that the null hypothesis is rejected at the 5% significance level and the other institute contributes to explaining one’s own forecast errors
Summary
Macroeconomic forecasts provide important information for economic policy makers, companies and private households. We consider the following variables: annual growth rates of real GDP, private consumption, real gross fixed capital formation (investment), exports, and imports In addition to these demand components, forecasts of the inflation rate as measured by the national consumer price index and forecasts of the unemployment rate (according to national statistics, i.e., registered unemployment) are evaluated. We use the first (and usually final) publications of annual inflation and annual unemployment data; for the national accounts variables, we take the first release of the annual accounts, published by the Austrian statistical office approximately nine months after the end of a given year. Evaluations of macroeconomic forecasts for Austria usually take the first preliminary release of the national accounts provided by WIFO.7 Baumgartner (2002a, b) considers the first “final” release produced by the Austrian statistical office, as do we, and concludes that the differences are very small.
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
