tag:blogger.com,1999:blog-582368152716771238.post7785729818175790922..comments2024-03-29T05:46:24.412-05:00Comments on The Grumpy Economist: Groundhog DayJohn H. Cochranehttp://www.blogger.com/profile/04842601651429471525noreply@blogger.comBlogger14125tag:blogger.com,1999:blog-582368152716771238.post-42037571348552477152014-05-16T14:31:39.595-05:002014-05-16T14:31:39.595-05:00Hi John,
I also like Torsten's stuff and I li...Hi John,<br /><br />I also like Torsten's stuff and I liked that chart, at first glance. There are discrepancies, but one can replicate it by using the high end of the central tendency for 2010 and 2011. Then use the high end of the full Range for 2012 and 2013. Revert to the midpoint of the central tendency for the March forecast. Given the title of the chart, it was an unfortunate mistake. <br /><br />BillAnonymoushttps://www.blogger.com/profile/03441726603794767593noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-47753061271234062452014-05-15T15:07:34.609-05:002014-05-15T15:07:34.609-05:00"they chase the guy who got lucky yesterday.&... "they chase the guy who got lucky yesterday."<br /><br />That seems to be an issue mainly in finance where it is a systemic problem.<br /><br />The fact that no one can reliably do better (Krugman might disagree) is really proof that all of the models are broken. The test of any theory is its ability to make correct predictions and by that test all of the macro economic theories are wrong. Absalonhttps://www.blogger.com/profile/09131268683451462949noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-83843287437176602562014-05-15T13:29:00.859-05:002014-05-15T13:29:00.859-05:00Only if there is someone who can reliably do bette...Only if there is someone who can reliably do better. Which there is not, accent on the reliably. In many businesses of course they chase the guy who got lucky yesterday. John H. Cochranehttps://www.blogger.com/profile/04842601651429471525noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-27976990400854507922014-05-15T13:26:42.194-05:002014-05-15T13:26:42.194-05:00"no serious forecaster expected."
I hop..."no serious forecaster expected."<br /><br />I hope you see the irony in the fact that all of the people you consider to be "serious" turned out to be wrong. They might have been "serious" and put on long faces and stroked their chins thoughtfully but they were WRONG. In my profession, if you are wrong about big stuff you get fired. If you are really wrong, you get sued. And if you are really, really wrong, you get disbarred. But then my profession believes in professionalism and personal responsibility.<br /><br />As far as blame for the slump goes: there is no point in arguing over who gets how much; there is more than enough for everyone. <br />Absalonhttps://www.blogger.com/profile/09131268683451462949noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-71337867698171554672014-05-14T09:54:28.898-05:002014-05-14T09:54:28.898-05:00"This Time is Different"
Caveats - R-R w..."This Time is Different"<br />Caveats - R-R was a descriptive history really, and several steps between it and coming up with workable macro model assumptions; huge variation in individual historical events - yet, after reading that, I remained deeply skeptical of any forecast that looked like those above - I won't make a too strong personal claim - skepticism is itself several steps away from calling a turn (or lack of one) - but seems that better understanding financial system crisis is keyAnonymoushttps://www.blogger.com/profile/07997581411308083927noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-28144023212537355702014-05-13T03:54:20.035-05:002014-05-13T03:54:20.035-05:00They're using FRB/US:
http://www.federalreser...They're using FRB/US: <br />http://www.federalreserve.gov/econresdata/notes/feds-notes/2014/a-tool-for-macroeconomic-policy-analysis.html<br /><br />But of course no serious forecaster uses a general equilibrium model without conditioning information, so there is of course a lot more that goes into generating an actual forecast than simply one model. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-18058355810760929002014-05-13T03:33:08.902-05:002014-05-13T03:33:08.902-05:00I know of at least two private sector firms which ...I know of at least two private sector firms which use DSGE models for macro forecasting. But sure, it's atypical. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-3012799298322035202014-05-12T09:36:28.379-05:002014-05-12T09:36:28.379-05:00Unfortunately, Torsten's figure contains a cou...Unfortunately, Torsten's figure contains a couple of misleading pieces. First, he uses the upper band of the central tendency for the FOMC forecast. This will have an upward bias and therefore make the FOMC projection look worse than it actually was. Second, he plots an “actual” Q4/Q4 growth rate for 2014 when we currently only have the advance release for 2014q1. Once these two errors are fixed the forecast still looks bad in 2010 and 2011, but overall the picture is not as bad as Torsten suggests.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-50587094972990892512014-05-11T23:15:07.699-05:002014-05-11T23:15:07.699-05:00For five years running, the Fed has shot high on g...For five years running, the Fed has shot high on growth forecasts, and higher even on inflation forecasts. <br /><br />In 2008, the FOMC board was told by Fed staffers to expect 2 percent annual increases in unit labor costs for next five years. That was baked into the forecasts (this was in the transcripts of the FOMC meetings, which finally became public).<br /><br />Instead, we see unit labor costs have deflated since 2008. In fact, unit labor cats are falling for last six months, as measured and are below the level at the start of the Great Bust.<br /><br />http://research.stlouisfed.org/fred2/series/ULCNFB<br /><br />How do you get inflation with falling unit labor costs? <br /><br />Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-69821554145213261952014-05-11T20:32:39.296-05:002014-05-11T20:32:39.296-05:00It's not just the Fed. The Australian Treasury...It's not just the Fed. The Australian Treasury could make far better forecasts if they were to incorporate last year's forecast error in their current forecasts. <br /><br />Here's a little chart I made of their forecasting performance. Note the 3 per cent of GDP downgrade in budget forecasts between the Mid-year budget update (MYEFO) in 2012 and 2013. During that period, the then government abandoned their commitment to return the budget to surplus. It makes one wonder how much the forecasts were informed by political commitments...<br /><br /> pic.twitter.com/2402eDIY6djavagehttps://www.blogger.com/profile/16427725069671113980noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-82212101181526139922014-05-11T19:09:14.899-05:002014-05-11T19:09:14.899-05:00I haven't spoken to a private forecaster who u...I haven't spoken to a private forecaster who uses a DSGE model.Johnhttps://www.blogger.com/profile/01457388998903348000noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-70596826199666663992014-05-11T17:40:49.435-05:002014-05-11T17:40:49.435-05:00Nice post. I think the question of why is interest...Nice post. I think the question of why is interesting, noting that it may be the economy, not our forecasting models that have been "broken" recently. Here's one take from last September's press conference (p 14 http://federalreserve.gov/mediacenter/files/FOMCpresconf20130918.pdf) <br /><br />"CHAIRMAN BERNANKE. Well, you’re certainly right that we have been over- optimistic about out-year growth. There are a number of reasons for that. One reason for it, though, is that it appears—and I talked about this in a speech last year—it appears that, as part of the aftermath of the financial crisis, that, at least temporarily, the potential growth rate of the economy has been slowed, perhaps because new businesses are not being formed at the same rate, innovation may not be translated into new technologies at the same rate, investment is slower, et cetera. So it appears, again, that the potential rate of growth of the economy has been slowed somewhat, at least temporarily, by the recession and the financial crisis, and you can see that in the slower productivity figures.<br /><br />Now, we have—you know, we haven’t anticipated that slowdown in productivity, and that’s one of the main reasons why we haven’t anticipated the relatively slow growth. Now, it’s important to recognize though that what monetary policy affects is not the potential rate of growth, long-run rate of growth, but rather the cyclical part, the deviation of output and employment from its normal level. And in predicting the amount of slack in the economy, so to speak, we’ve done a little better. Our predictions of unemployment, for example, have been better than our predictions of growth. And, in particular, one thing that’s been quite striking is that unemployment—we were too pessimistic on unemployment for this year. Unemployment has fallen faster than we anticipated. So, in that respect, we were too pessimistic rather than too optimistic."Claudia Sahmhttps://www.blogger.com/profile/03501488047889000055noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-68773719172940747982014-05-11T15:43:30.490-05:002014-05-11T15:43:30.490-05:00I know that the private forecasters use a mean rev...I know that the private forecasters use a mean reverting interest rate model. It is shockingly rare to see VAR's use in private sector forecasts.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-19481035111191092392014-05-11T15:14:51.044-05:002014-05-11T15:14:51.044-05:00What on Earth are they using for forecasting? A Sm...What on Earth are they using for forecasting? A Smets-Wouters model??Noah Smithhttps://www.blogger.com/profile/09093917601641588575noreply@blogger.com