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Common Biases in OECD and IMF Forecasts:Who Dares to be Different?
Heinz GlückOesterreichische Nationalbank
Stefan P. SchleicherUniversity of Graz
Project LINK Meeting in Mexico CityMay 16-20, 2005
Motivation for this paper
We are comparing forecasts and ex-post data revisions for G-7 countries
Real-time estimatesGDP estimates by OECD and IMF
Agnostic data analysis We do not investigate the reasons for differences
We investigate the hypothesis of common biasesCommon exogenous assumptionsInteraction of forecastersUncertainty decreases over time as forecasts evolve
Dated OECD estimates for USAOECD Estimates GDP USA
Estimation errors
-2,00
0,00
2,00
Year -
2 Sec.
Year -
1 Firs
tYear
-1 Sec.
Year 0
First
Year 0
Sec
.Yea
r +1 F
irst
Year +
1 Sec
.Yea
r +2 F
irst
Year +2 S
ec.La
st Rep
orted
Per
cent
poi
nts
diff
eren
ce
to la
st re
port
ed 1990
2003
1995
2000
Target yearBefore target year After target year
Dated IMF estimates for USAIMF Estimates GDP USA
Estimation errors
-2,00
0,00
2,00
Year -
2 Sec.
Year -
1 Firs
tYea
r -1 S
ec.Yea
r 0 Firs
tYea
r 0 Sec.
Year +
1 Firs
tYea
r +1 S
ec.
Year +
2 Firs
tYear
+2 Sec
.Las
t Rep
orted
Perc
ent p
oint
s di
ffer
ence
to
last
repo
rted 1990
2003
1995
2000
Target yearBefore target year After target year
Comparison of OECD / IMF estimates for USA
IMF Estimates GDP USAEstim ation errors
-2,00
0,00
2,00Yea
r -2 S
ec.
Year
-1 Fi
rstYe
ar -1
Sec.
Year 0
Firs
tYea
r 0 Sec
.Yea
r +1 F
irst
Year
+1 S
ec.
Year +
2 Firs
tYea
r +2 S
ec.
Last R
epor
ted
Per
cent
poi
nts
diff
eren
ce
to la
st r
epor
ted 1990
2003
1995
2000
Target yearBefore target year After target year
OECD Estimates GDP USAEstimation errors
-2,00
0,00
2,00
Year
-2 Se
c .Yea
r -1 Firs
tYea
r -1 S
ec.
Year 0
First
Year 0
Sec.
Year +
1 Firs
tYe
ar +1 S
ec.
Year +
2 Firs
tYea
r +2 S
ec.
Last R
eport
ed
Perc
ent p
oint
s di
ffere
nce
to la
st re
port
ed 1990
2003
1995
2000
Target yearBefore target year After target year
IMF Estimates GDP JapanEstimation errors
-2,00
0,00
2,00
Year -2
Sec.
Year -
1 Firs
tYea
r -1 Sec
.Yea
r 0 Firs
tYea
r 0 S
ec.
Year +1 F
irst
Year +
1 Sec.
Year +2 F
irst
Year +
2 Sec.
Last
Reporte
d
Perc
ent p
oint
s di
ffer
ence
to
last
repo
rted
1990
200319952000
Target yearBefore target year After target year
Comparison of OECD / IMF estimates for Japan
OECD Estimates GDP JapanEstimation errors
-2,00
0,00
2,00
Year -2 Sec.
Year -1 Firs
tYea
r -1 Sec.
Year 0 F irs
tYear 0
Sec
.Year +
1 First
Year +1 Sec.
Year +2 Firs
tYea
r +2 S
ec.Last R
eported
Perc
ent p
oint
s di
ffer
ence
to
last
repo
rted
1990
20031995
2000Target yearBefore target year After target year
We investigate two types of potential biases
Step 1: Common biases among OECD / IMF estimates for the G7
Evidence of strong common biases for OECD / IMF estimates for each G7 country
Step 2: Common biases among G7 country estimatesfor IMF
But only a few country groups exhibit common biases within the set of OECD / IMF estimates
This is a puzzling resultDespite strong common biased estimates between OECD and IMF estimates for each G7 country, this is in general not true among countries
Step 1:Common biases among OECD/IMF
We investigate common biases among OECD / IMF estimates countries for each G7 country
Methodology:Sequentially estimated correlations and biases with fading memory
Common biases among OECD/IMF USA
GDP USACorrelation and bias with last reported values
-1
0
1
1985 1990 1995 2000
Cor
rela
tion
-1
0
1
Bia
sPe
rcen
tage
poi
nts
OECD
IMF
Common biases among OECD/IMF Japan
GDP JapanCorrelation and bias with last reported values
-1
0
1
1985 1990 1995 2000
Cor
rela
tion
-1
0
1
Bia
sPe
rcen
tage
poi
ntsOECD
IMF
Common biases among OECD/IMF Germany
GDP GermanyCorrelation and bias with last reported values
-1
0
1
1985 1990 1995 2000
Cor
rela
tion
-1
0
1
Bia
sP
erce
ntag
e po
ints
OECD IMF
Common biases among OECD/IMF France
GDP FranceCorrelation and bias with last reported values
-1
0
1
1985 1990 1995 2000
Cor
rela
tion
-1
0
1
Bia
sPe
rcen
tage
poi
nts
OECD
IMF
Common biases among OECD/IMF Italy
GDP ItalyCorrelation and bias with last reported values
-1
0
1
1985 1990 1995 2000
Corr
elat
ion
-1
0
1
Bias
OECD
IMF
Common biases among OECD/IMF United Kingdom
GDP United KingdomCorrelation and bias with last reported values
-1
0
1
1985 1990 1995 2000
Corr
elat
ion
-1
0
1
Bias
Perc
enta
ge p
oint
s
OECD
IMF
Common biases among OECD/IMF Canada
GDP CanadaCorrelation and bias with last reported values
-1
0
1
1985 1990 1995 2000
Cor
rela
tion
-1
0
1
Bia
sPe
rcen
tage
poi
nts
OECD
IMF
Common biases among OECD/IMFConclusions
Very strong common biases between OECD and IMF estimatesOECD estimate is a good predictor for IMF estimate and vice versa
Accuracy of estimates varies over timeEstimates improve since 1990 (except USA)Biases always positive (underestimation)but become lower
OECD and IMF don’t dare to be different
Step 2:Common biases among countries
We investigate common biases among G7 countries within the set of IMF estimates
Methodology:Sequentially estimated covariances with fading memory
Common biases among countriesUSA / *
-1
0
1
1985 1990 1995 2000
Corr
elat
ion
USA/CAN
-1
0
1
1985 1990 1995 2000
Corr
elat
ion
USA/GB
-1
0
1
1985 1990 1995 2000
Corre
latio
n
USA/ITA
-1
0
1
1985 1990 1995 2000
Corre
latio
n
USA/FRA
-1
0
1
1985 1990 1995 2000
Cor
rela
tion
USA/DEU
-1
0
1
1985 1990 1995 2000
Cor
rela
tion
USA/JPN
Common biases among countriesJapan / *
-1
0
1
1985 1990 1995 2000
Cor
rela
tion
JPN/CAN
-1
0
1
1985 1990 1995 2000
Corre
latio
n
JPN/GBR
-1
0
1
1985 1990 1995 2000
Corr
elat
ion
JPN/ITA
-1
0
1
1985 1990 1995 2000
Cor
rela
tion
JPN/FRA
-1
0
1
1985 1990 1995 2000
Corr
elat
ion
JPN/DEU
Common biases among countries Germany / *
-1
0
1
1985 1990 1995 2000
Corr
elat
ion
DEU/CAN
-1
0
1
1985 1990 1995 2000
Corr
elat
ion
DEU/GB
-1
0
1
1985 1990 1995 2000
Corre
latio
n
DEU/ITA
-1
0
1
1985 1990 1995 2000
Corre
latio
n
DEU/FRA
Common biases among countries France / *
-1
0
1
1985 1990 1995 2000
Corr
elat
ion
FRA/CAN
-1
0
1
1985 1990 1995 2000
Cor
rela
tion
FRA/GB
-1
0
1
1985 1990 1995 2000
Cor
rela
tion
FRA/ITA
Common biases among countries Italy / *
-1
0
1
1985 1990 1995 2000
Corre
latio
n
ITA/CAN
-1
0
1
1985 1990 1995 2000
Corr
elat
ion
ITA/GBR
Common biases among countries United Kingdom / *
-1
0
1
1985 1990 1995 2000
Corre
latio
n
GBR/CA
Common biases among countriesConclusions
Only among a very few country groups we can observe common biases
USA – CanadaGermany – France – ItalyUnited Kingdom – Canada
Japan is “isolated”Decoupled from USA after 1990
This is a puzzling result
Despite significant biases in all OECD / IMF estimates only a few show common features
Final remarks
We only reported the results for the first forecast for the target year.
The estimates show systematic and significant biases
The estimates can be improved for policy analysis by correcting for these biases