Growth and Inflation Forecasts for Germany: A Panel-Based Assessment of Accuracy and Efficiency

Abstract

We analyse forecasts of professional forecasters for Germany regarding the time span from 1970 to 2004. This novel panel data set renders it possible to assess the accuracy and efficiency of growth and inflation forecasts more efficiently than in previous studies. We argue that the forecasts are, on average, unbiased and weakly - but not strongly - efficient. Using model confidence sets suggested by Hansen et al. (2004), we find that, besides the effect of diverging forecastingdates, no other substantial differences in forecasting quality among forecasters exist. Nevertheless, on the basis of a direction-of-change analysis we argue that it is not always advisable to listen to the majority of forecasters.