Saturday, August 16, 2008

Irrational Exuberance of Economists?

Stephen Mihm's article on Roubini said:

"A recent study looked at “consensus forecasts” (the predictions of large groups of economists) that were made in advance of 60 different national recessions that hit around the world in the ’90s: in 97 percent of the cases, the study found, the economists failed to predict the coming contraction a year in advance. On those rare occasions when economists did successfully predict recessions, they significantly underestimated the severity of the downturns. Worse, many of the economists failed to anticipate recessions that occurred as soon as two months later."

Does anybody know the reference for this study?


Anonymous said...

This may be what you are looking for:

"How accurate are private sector forecasts? Cross-country evidence from consensus forecasts of output growth" in International Journal of Forecasting Vol. 17, No. 3, pp. 419-32.

Shag from Brookline said...

Might consensus forecasts of economists be questionable with responses like: "On the one hand, .... On the other hand, ...." that drove Pres. Truman crazy, as he searched for a one-handed economist?