Differing behaviours of forecasters of UK GDP growth

Meade, Nigel; Driver, Ciaran

Abstract

The literature suggests that the dispersion of agents’ forecasts of an event flows from heterogeneity of beliefs and models. Using a data set of fixed event point forecasts of UK GDP growth by a panel of independent forecasters published by HM Treasury, we investigate three questions concerning this dispersion: (a) Are agent’s beliefs randomly distributed or do agents fall into groups with similar beliefs? (b) as agents revise their forecasts, what roles are played by their previous and consensus forecasts? and (c) is an agent’s private information of persistent value? We find that agents fall into four clusters, a large majority, a few pessimists, and two idiosyncratic agents. Our proposed model of forecast revisions shows agents are influenced positively by a change in the consensus forecast and negatively influenced by the previous distance of their forecast from the consensus. We show that the forecasts of a minority of agents significantly lead the consensus.

Citation

Meade, N., & Driver, C. (2023). Differing behaviours of forecasters of UK GDP growth. International Journal of Forecasting, 39(2), 772-790. https://doi.org/10.1016/j.ijforecast.2022.02.005

• Journal Article Type: Article
• Acceptance Date: Apr 1, 2022
• Online Publication Date: Apr 11, 2022
• Publication Date: Jun 1, 2023
• Deposit Date: Apr 19, 2022
• Publicly Available Date: Apr 19, 2022
• Journal: International Journal of Forecasting
• Print ISSN: 0169-2070
• Electronic ISSN: 1872-8200
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 39
• Issue: 2
• Pages: 772-790
• DOI: https://doi.org/10.1016/j.ijforecast.2022.02.005
• Keywords: GDP forecasts, Fixed event forecasting, Herding, Cluster analysis, Granger causality
• Publisher URL: https://www.sciencedirect.com/science/article/abs/pii/S0169207022000334