The Unassuming Economist

From a new VOX post on long-term growth forecasts:

“Although long-term macroeconomic forecasts substantially affect the sustainability of government debt and the social security system, they cannot avoid significant uncertainty. This column assesses whether academic researchers in economics make accurate long-term growth forecasts, comparing ten-year growth forecasts made by Japanese economists in 2006–2007 with the realised figures. Even excluding the years affected by the Global Crisis, the results show that forecasts tend to be biased upwards and involve significant uncertainty, even for economics researchers specialising in macroeconomics or economic growth.”

“Figure 1 shows the means and medians of forecast errors. Forecasts by the researchers in economics have an optimistic bias, similar to the findings for the forecasts by the government agencies. Even after removing the two years affected by the Global Crisis to calculate annual growth rates, a non-negligible upward bias remains: about 0.5-0.6 percentage points for real GDP growth and about 1.3-1.4 percentage points for nominal GDP growth. ”