Keywords: Predictability, variability, forecast errors, Greenbook
Abstract: Several researchers have recently documented a large reduction in output
volatility. In contrast, this paper examines whether output has become more
predictable. Using forecasts from the Federal Reserve Greenbooks, I find the
evidence is somewhat mixed. Output seems to have become more predictable at
short horizons, but not necessarily at longer horizons. The reduction in
unpredictability is much less than the reduction in volatility.
Associated with this, recent forecasts had little predictive power.
Full paper (195 KB PDF)
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Last update: September 1, 2005