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  • Author: Jakub Rybacki x
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Abstract

Macroeconomic forecasters are often believed to idealistically work on improving the accuracy of their estimates based on for example the Root Mean Squared Error (RMSE). Unfortunately, reality is far more complex. Forecasters are not awarded equally for each of their estimates. They have their targets of acquiring publicity or to earn prestige. This article aims to study the results of Parkiet's competitions of macroeconomic forecasting during 2015–2019. Based on a logit model, we analyse whether more accurate forecasting of some selected macroeconomic variables (e.g. inflation) increases the chances of winning the competition by a greater degree comparing to the others. Our research shows that among macroeconomic variables three groups have a significant impact on the final score: inflation (CPI and core inflation), the labour market (employment in the enterprise sector and unemployment rate) and financial market indicators (EUR/PLN and 10-year government bond yields). Each group is characterised by a low disagreement between forecasters. In the case of inflation, we found evidence that some forecasters put a greater effort to score the top place. There is no evidence that forecasters are trying to somehow exploit the contest.

Abstract

The academic literature in the past has frequently highlighted that the European Commission (EC) tends to provide more accurate public finance forecasts compared with national governments, thanks to its neutrality. The recent conflicts regarding the excessive deficit procedure with Romania and Italy and rule of law with Hungary and Poland raises the question of whether such conclusions are still binding. Therefore, we analysed a panel of forecasts submitted by the national governments with an annual update of Convergence programmes and corresponding EC predictions. Our dataset contains predictions of the general government deficit, revenues and expenditures for EU27 economies and the United Kingdom in the years 2014–2019. First, the analysis shows no meaningful discrepancies between both estimates when the horizon is set at the current year. Forecasts for the next year have equal accuracy in the case of government revenues and expenditures. However, the EC performs worse in the case of the final deficit. Second, cross-country effects are present, but the accuracy is different mainly in the very small economies, that is, the Baltic countries, Cyprus, Malta and Luxembourg. Amongst the more populated states, the EC outperforms the Slovakian and Denmark governments but has worse performance than the Irish, Portuguese and Spanish governments. We also do not see evidence of any political bias in the forecasts.