Seminar: Evaluating CPB's forecasts

Time: 13.00-14.00 hours
Location: CPB-office, Van Stolkweg 14, The Hague

Presentation: Philip Hans Franses (EUR)

Discussant: Albert van der Horst (CPB)

Language: English

Registration:  Please register by sending an email to seminars@cpb.nl.

Abstract subject "Forecasts from large-scale macro-economic models can be evaluated against forecasts from benchmark time series models. This paper first recommends that a fair comparison would require real-time forecasts from these time series models. Applying this notion to the forecasts from the Netherlands Bureau for Economic Policy Analysis (CPB) for 1971-2007 for thirteen macro-economic variables for the Netherlands shows that CPB’s forecasts improve on such benchmark forecasts with about 14% on average. Next, as forecasts from macro-economic models usually involve judgmental adjustment by experts, it is relevant to quantify the added value of the modelers relative to the benchmark time series model. A simple method is proposed, and it is applied to the same thirteen series. On average, the macro-modelers are found not to reduce forecast uncertainty. However, when the CPB forecasts and benchmark forecasts are combined, the CPB forecasts are twice as relevant as the benchmark forecasts."

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