Rationality and Quality of Economic Forecasts
Economic forecasts are utilized to decrease uncertainty relating to planning processes of companies and governments. Empirical research shows evidence that the level of forecast quality is generally rather poor. In order to gain further insight the concept of forecast rationality evolved. This means that systematic errors like frequent overestimations have to be avoided. The first part of the dissertation thesis cares about the common understanding of forecast rationality. It is criticized as too extensive which could lead to premature conclusions. A new empirical approach confirms rational forecasts based on a narrowed understanding of rationality. The second section shows that business cycle forecasts could be improved by use of publicly available early indicators. Therefore the specific forecast rationality has to be seen as limited. The third study takes a deeper look into forecast revisions. As a surprising result no link between rationality and quality of the examined forecasts can be found. The last chapter contains results of an experimental planning game, which aimed the comparison between forecasts of amateurs and professionals. It turns out that both types of forecasters fail in a very similar way.
Period of Dissertation