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Consensus Forecasts and Inefficient Information Aggregation

Author/Editor: Crowe, Christopher W.
Authorized for Distribution: July 1, 2010
Electronic Access: Free Full Text (PDF file size is 1,032KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: Consensus forecasts are inefficient, over-weighting older information already in the public domain at the expense of new private information, when individual forecasters have different information sets. Using a cross-country panel of growth forecasts and new methodological insights, this paper finds that: consensus forecasts are inefficient as predicted; this is not due to individual forecaster irrationality; forecasters appear unaware of this inefficiency; and a simple adjustment reduces forecast errors by 5 percent. Similar results are found using US nominal GDP forecasts. The paper also discusses the result’s implications for users of forecaster surveys and for the literature on information aggregation.
 
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Series: Working Paper No. 10/178
Subject(s): Cross country analysis | Economic forecasting | Economic growth | Gross domestic product
Author's keyword(s): Consensus Forecasts | Information Aggregation; Forecast Efficiency
 
English  
    Published:   July 1, 2010        
            Format:   Paper
    Stock No:   WPIEA2010178   Pages:   43
    Price:   US$18.00
       
     
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