Evaluating German Business Cycle Forecasts Under an Asymmetric Loss Function

Arbeitspapier

Based on annual data for growth and inflation forecasts for Germany covering the time span from 1970 to 2007 and up to 17 different forecasts per year, we test for a possible asymmetry of the forecasters' loss function and estimate the degree of asymmetry for each forecasting institution using the approach of Elliot et al. (2005). Furthermore, we test for the rationality of the forecasts under the assumption of a possibly asymmetric loss function and for the features of an optimal forecast under the assumption of a generalized loss function. We find only limited evidence for the existence of an asymmetric loss functions of German forecasters. As regards the rationality of the forecasts the results depend on the underlying assumption of the test. The rationality of inflation forecasts is more doubtful than those of growth forecasts.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: DEP (Socioeconomics) Discussion Papers - Macroeconomics and Finance Series ; No. 5/2009

Classification and Topics

• Classification: Wirtschaft ; Forecasting Models; Simulation Methods ; Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems
• Subject: Business cycle forecast evaluation ; asymmetric loss function ; and rational expectations

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Doepke, Joerg ; Fritsche, Ulrich ; Siliverstovs, Boriss
• Event: Veröffentlichung
• (who): Hamburg University, Department Economics and Politics
• (where): Hamburg
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/103167
• Last update: 10.03.2025, 11:42 AM CET