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The prudence bias: assessing institutional forecasters´ asymmetric loss functions
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Orientador(es)
Resumo(s)
The general posture towards forecasts is often one of scepticism: provided with the same in formation, predictions differ significantly. But the inefficient use of information might not be
the single cause to blame. I assess the potential biased behaviour from fiscal and monetary
authorities towards over- and underpredictions of key macroeconomic variables. I propose an
estimation routine based on GMM to identify asymmetric loss functions and discuss the plau sible underlying economic costs that shape the preferences of institutions and thus respective
forecasts. I find that all institutions favour the overprediction of real output growth and mone tary authorities prefer to underpredict inflation, whilst fiscal authorities tend to overpredict it.
Descrição
Palavras-chave
Macroeconomic 1forecasting Loss function Asymmetric preferences Forecast rationality Macroeconometrics