[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"doc-seo-325081-105":3,"detail-sidebar-cat-0-en-105":81,"doc-detail-325081-en":130},{"code":4,"msg":5,"data":6},0,"ok",{"site_id":7,"language":8,"slug":9,"title":10,"keywords":11,"description":12,"schema_data":13,"social_meta":74,"head_meta":76,"extra_data":78,"updated_unix":80},105,"en","forecast-accuracy-and-monetary-policy-economic-commentary","Forecast Accuracy and Monetary Policy - Economic Commentary","","Examines how accurately macroeconomic forecasters predict growth in real GNP and inflation, and what these differences imply for monetary policy. Highlights that near-term real GNP projections tend to be of limited usefulness for policymakers, while forecast accuracy varies with horizon length. Uses long-run data patterns to compare variability of real growth versus inflation and discusses how these properties affect the likelihood of improving forecasting precision for policy decisions.",{"@graph":14,"@context":73},[15,34,56],{"@type":16,"itemListElement":17},"BreadcrumbList",[18,23,27,31],{"item":19,"name":20,"@type":21,"position":22},"https://docshare.wps.com","Home","ListItem",1,{"item":24,"name":25,"@type":21,"position":26},"https://docshare.wps.com/document/","Document",2,{"item":28,"name":29,"@type":21,"position":30},"https://docshare.wps.com/document/research-report/","Research & Report",3,{"item":32,"name":10,"@type":21,"position":33},"https://docshare.wps.com/document/forecast-accuracy-and-monetary-policy-economic-commentary/325081/",4,{"url":32,"name":10,"@type":35,"image":36,"author":41,"headline":10,"publisher":44,"fileFormat":47,"inLanguage":8,"description":12,"dateModified":48,"datePublished":49,"encodingFormat":47,"isAccessibleForFree":50,"interactionStatistic":51},"DigitalDocument",{"url":37,"@type":38,"width":39,"height":40},"https://docshare.wps.com/thumbnails/forecast-accuracy-and-monetary-policy-economic-commentary/325081.png","ImageObject",300,407,{"name":42,"@type":43},"Anda","Person",{"url":19,"name":45,"@type":46},"DocShare","Organization","application/pdf","2026-10-29","2026-09-21",true,{"@type":52,"interactionType":53,"userInteractionCount":55},"InteractionCounter",{"@type":54},"ViewAction",9,{"@type":57,"mainEntity":58},"FAQPage",[59,65,69],{"name":60,"@type":61,"acceptedAnswer":62},"Why do policymakers, including the Federal Reserve, use economic forecasts?","Question",{"text":63,"@type":64},"Monetary policy affects business conditions, but generally with a lag. Forecasts are used because policymakers need some prevision of future economic conditions to implement an activist policy.","Answer",{"name":66,"@type":61,"acceptedAnswer":67},"How does forecast accuracy differ between real GNP growth and inflation?",{"text":68,"@type":64},"The text indicates quarterly inflation forecasts are often more accurate than quarterly real GNP growth forecasts for comparable horizons, and that forecast accuracy behaves differently as the forecast horizon changes.",{"name":70,"@type":61,"acceptedAnswer":71},"What do data patterns suggest about the variability of real growth versus inflation over time?",{"text":72,"@type":64},"The document states that real GNP growth variability narrows substantially when using longer time intervals, while inflation does not show a similar reduction in variability; it remains relatively more variable over long periods.","https://schema.org",{"og:url":32,"og:type":75,"og:title":10,"og:site_name":45,"og:description":12},"article",{"robots":77,"canonical":32},"index,follow",{"doc_id":79,"site_id":7},325081,1791077919,{"code":4,"msg":82,"data":83},"success",[84,88,92,96,101,106,111,115,119,122,126],{"id":22,"doc_module":4,"doc_module_name":25,"category_name":85,"show_sort_weight":86,"slug":87},"Story & Novel",90,"story-novel",{"id":26,"doc_module":4,"doc_module_name":25,"category_name":89,"show_sort_weight":90,"slug":91},"Literature",80,"literature",{"id":33,"doc_module":4,"doc_module_name":25,"category_name":93,"show_sort_weight":94,"slug":95},"Exam",70,"exam",{"id":97,"doc_module":4,"doc_module_name":25,"category_name":98,"show_sort_weight":99,"slug":100},5,"Comic",60,"comic",{"id":102,"doc_module":4,"doc_module_name":25,"category_name":103,"show_sort_weight":104,"slug":105},6,"Technology",50,"technology",{"id":107,"doc_module":4,"doc_module_name":25,"category_name":108,"show_sort_weight":109,"slug":110},7,"Healthcare",40,"healthcare",{"id":112,"doc_module":4,"doc_module_name":25,"category_name":29,"show_sort_weight":113,"slug":114},8,30,"research-report",{"id":55,"doc_module":4,"doc_module_name":25,"category_name":116,"show_sort_weight":117,"slug":118},"Religion & Spirituality",20,"religion-spirituality",{"id":117,"doc_module":4,"doc_module_name":25,"category_name":120,"show_sort_weight":117,"slug":121},"World Cup","world-cup",{"id":123,"doc_module":4,"doc_module_name":25,"category_name":124,"show_sort_weight":123,"slug":125},10,"Lifestyle","lifestyle",{"id":127,"doc_module":4,"doc_module_name":25,"category_name":128,"show_sort_weight":97,"slug":129},19,"General","general",{"code":4,"msg":82,"data":131},{"doc_id":79,"user_id":132,"nickname":42,"user_avatar":133,"doc_module":4,"category_id":112,"category_name":29,"doc_title":10,"doc_description":12,"doc_content":134,"file_id":135,"file_url":136,"file_type":137,"file_size":138,"view_count":55,"is_deleted":4,"is_public":22,"is_downloadable":22,"audit_status":22,"page_count":97,"language":139,"language_code":8,"site_id":7,"html_lang":8,"table_of_contents":140,"faqs":141,"seo_title":142,"seo_description":12,"update_tm":143,"read_time":144,"preview_page_count":4},962075006959,"https://ap-avatar.wpscdn.com/avatar/e0002397efbe92a78e?_k=1776741047341049297","# Forecast Accuracy andMonetary Policy\n\nby Michael F.Bryan and William T.Gavin  \nIt has been suggested that the purposeof economic forecasting is to makeweather forecasters look good by com-parison.Despite their inaccuracies,though,forecasts of the economy mustbe useful,given the large number ofthem available and the relatively highcost of producing such information.In-deed,if forecasters can even marginallyreduce uncertainty about future businessconditions,the savings to business ispotentially huge  \nBut why do policymakers,specificallythe Federal Reserve,use forecasts?Monetary policy is generally thoughtto influence business conditions,butonly after a lag,and therefore an activ-ist policy requires some prevision ofthe economy.  \nYet,the forecasting record of econo-mists suggests that near-term real GNPprojections are of limited usefulness tomonetary policymakers.However,itmay be that monetary policy can affectforecast accuracy.This Economic Com-mentary examines the accuracy ofmacroeconomic forecasts and discussessome implications for monetary policy.  \n## ■ The Nature of the Data\n\nThe dimensions of the job faced by fore-casters can be put into perspective byexamining tendencies in the data.Con-sider the pattern of quarterly rates of realGNPgrowth and inflation over the past35 years(figure 1).The average quarter-ly growth rate of real GNPwas 3.1 per-  \ncent—1.5 percent less than the averagequarterly rate of inflation.Yet,quarterlyreal growth rates showed a huge disper-sion,from a minimum of-9percent to amaximum of 14 percent,with a standarddeviation of 4.0 percent.Quarterly ratesof inflation were relatively less variable,ranging from 0 to 15 percent,with astandard deviation of 2.8 percent.  \nNote,however,that as the number ofquarters in the time period increases,thevariability of real growth narrows sub-stantially.For example,the four-quartergrowth rate of real GNP has only 65 per-cent of the volatility of the one-quartergrowth rate(a standard deviation of 2.6percent compared with 4.0 percent)The average real growth rate continuesto become less variable as the timeperiod lengthens:Five-year real GNPgrowth rates have only 25 percent of thevolatility of quarterly growth rates,andten-year growth rates have less than 18percent of the volatility of quarterlyrates(standard deviations of 1.0 percentand 0.7 percent,respectively).  \nInflation,however,has not shown asimilar inclination to become less vari-able over long periods.The standarddeviation of the ten-year inflation rateis still about 70 percen the size of thequarterly inflation rates(a standarddeviation of 2.0 percent compared with  \n2.8 percent).  \nMoreover,historica pattems indicatethat the ten-year rate of real GNP growthhas predominantly been between 2 and 3  \nJanuary 1,1991  \nThe policy forecaster,on the otherhand,necessarilyfocuses on thoseaspects of the economy that policymost directly influences.For example,it is generally agreed that monetarypolicy affects the general price level inthe long run,and aggregate outputand employment in the short run.These are variables by which the suc-cess of monetary policy most often isjudged.Consequently,they are thevariables of primary interest to thepolicy forecaster.  \nAlan Greenspan,on the distinctions be-tween private and public economicforecasters,from remarks presented atthe Annual Meeting of the NationalAssociation of Business Economists,Washington,D.C.,September 24,1990.  \npercent.Alternatively,there is no uniquetendency in the long-run inflation rate.That is,the ten-year rate of inflationwas just as likely to be low(1 to 2 per-cent)as high(6 to 7 percent).Thus,theobserved patterns of real GNPgrowthimply that the process that generatesoutput gravitates to a particular value,while the data reveal no comparableforces anchoring the inflation rate.²  \nThere are two forecasting implicationsof these tendencies in the data.Becausedeviations in quarterly changes in realGNPgrowth are 43 percent greater thanfor quarterly inflation rat","cbCailu2B7jcvCkS","https://ap.wps.com/l/cbCailu2B7jcvCkS","pdf",1229367,"English","# The Nature of the Data\n## The Forecast Record","[{\"question\":\"Why do policymakers, including the Federal Reserve, use economic forecasts?\",\"answer\":\"Monetary policy affects business conditions, but generally with a lag. Forecasts are used because policymakers need some prevision of future economic conditions to implement an activist policy.\"},{\"question\":\"How does forecast accuracy differ between real GNP growth and inflation?\",\"answer\":\"The text indicates quarterly inflation forecasts are often more accurate than quarterly real GNP growth forecasts for comparable horizons, and that forecast accuracy behaves differently as the forecast horizon changes.\"},{\"question\":\"What do data patterns suggest about the variability of real growth versus inflation over time?\",\"answer\":\"The document states that real GNP growth variability narrows substantially when using longer time intervals, while inflation does not show a similar reduction in variability; it remains relatively more variable over long periods.\"}]","Forecast Accuracy and Monetary Policy - Economic Commentary | PDF",1789969633,13]