Consensus Forecasts and Inefficient Information Aggregation
IMF Working Papers, July 1, 2010
Source details
- Canonical URL
- Consensus Forecasts and Inefficient Information Aggregation
Other formats
Bibliographic details
- Authors: Christopher W. Crowe
- Published: July 1, 2010
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455201891.001
Main findings
- Consensus forecasts are inefficient: they over-weight older information already in the public domain at the expense of new private information when individual forecasters have different information sets.
- Empirical results using a cross-country panel of growth forecasts:
- Consensus forecasts are inefficient as predicted.
- The inefficiency is not due to individual forecaster irrationality.
- Forecasters appear unaware of this inefficiency.
- A simple adjustment reduces forecast errors by 5 percent.
- Similar results are found using US nominal GDP forecasts.
- The paper discusses implications for users of forecaster surveys and for the literature on information aggregation.
Methodology and scope
- Uses a cross-country panel of growth forecasts and new methodological insights.
- Also applies analysis to US nominal GDP forecasts.
Policy and user implications
- Users of forecaster surveys should account for the tendency of consensus forecasts to over-weight older public information and under-weight new private information.
- A straightforward adjustment to consensus forecasts can reduce forecast errors, quantified here as a 5 percent reduction.
Content in this bundle
- Microsoft Word - WP Consensus Forecasts and Inefficient Information Aggregation rev1.docx