## Forecasts in Times of Crises

_IMF Working Papers, March 9, 2018_

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## Bibliographic details
- Authors: Theo S. Eicher, David J. Kuenzel, Chris Papageorgiou, Charalambos Christofides
- Published: March 9, 2018
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484345436.001

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### Publication metadata
- Title: Forecasts in Times of Crises  
- Authors: Theo S. Eicher, David J. Kuenzel, Chris Papageorgiou, Charalambos Christofides  
- Date: March 9, 2018  
- Series: Working Paper No. 2018/048  
- Volume: 2018; Issue: 048; Pages: 33  
- DOI: https://doi.org/10.5089/9781484345436.001  
- Stock No: WPIEA2018048  
- ISBN: 9781484345436  
- ISSN: 1018-5941

### Research scope and methods
- Data source: IMF’s Monitoring of Fund Arrangement (MONA) database.  
- Variables analyzed: 29 macroeconomic variables assessed for bias, efficiency, and information content.  
- Comparative benchmark: IMF forecasts evaluated against naive forecast approaches.

### Key findings
- IMF forecasts add substantial informational value as they consistently outperform naive forecast approaches.  
- Two thirds of the key macroeconomic variables examined are forecast inefficiently.  
- Six variables exhibit significant forecast bias:
  - growth of nominal GDP  
  - public investment  
  - private investment  
  - the current account  
  - net transfers  
  - government expenditures  
- Forecasts for low-income countries are the main drivers of forecast bias and inefficiency, reflecting perhaps larger shocks and lower data quality.

### Decomposition of forecast errors
- GDP growth forecast errors:
  - Forecast errors for private consumption growth are the key contributor to GDP growth forecast errors.  
- Fiscal budget forecast errors:
  - Forecast errors for non-interest expenditure growth and tax revenue growth are crucial determinants of the forecast errors in the growth of fiscal budgets.  
- Balance of payments forecast errors:
  - Forecast errors for balance of payments growth are significantly influenced by forecast errors in goods import growth.

### Implications for forecasting and policy
- IMF forecasts contain valuable information but exhibit systematic inefficiencies and biases across many aggregates, indicating scope for methodological improvement.  
- Particular aggregates requiring further attention in future forecast models for countries in crises:
  - nominal GDP growth  
  - public investment and private investment growth  
  - current account and net transfers  
  - government expenditures  
  - private consumption growth (for GDP errors)  
  - non-interest expenditure growth and tax revenue growth (for fiscal errors)  
  - goods import growth (for balance of payments errors)  
- Special focus recommended on forecasts for low-income countries due to their outsized role in driving bias and inefficiency.

*Source: IMF Working Paper "Forecasts in Times of Crises" (Working Paper No. 2018/048), March 9, 2018.*

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_Source: https://www.imf.org/en/publications/wp/issues/2018/03/09/forecasts-in-times-of-crises-45697_