Assessing forecast performance

The Reserve Bank today published a Bulletin article documenting the performance of the Bank’s forecasts over the period 2009 to 2015.

The Reserve Bank published similar reviews in 2009, 2006 and 2002. Central banks regularly review their forecast performance, often comparing their forecasts to those prepared by other agencies and private sector firms.

The Bulletin article explains that assessing the accuracy of macroeconomic forecasts is important for identifying opportunities to improve macroeconomic advice.

The Bulletin article concludes that over the past five years the Reserve Bank’s inflation forecasts have outperformed other macroeconomic forecasters. The Bank’s inflation forecasts have tended to be slightly lower than the median of the other macroeconomic forecasters and this assisted performance.

The Bank’s forecasts also outperformed external forecasters’ median forecast for output growth and the interest rate, but performed relatively poorly on the exchange rate. All forecasters consistently expected a lower exchange rate than transpired.

The Bulletin’s author – Dr Kirdan Lees – wrote the Bulletin article while at NZIER, under a contract from the Reserve Bank. Data used in the study was supplied by the Reserve Bank.

The Bulletin article can be read here.