The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
Macroeconomic forecasts are persistently too optimistic. This paper finds that common
factors related to general uncertainty about U.S. macrofinancial prospects and global demand
drive this overoptimism. These common factors matter most for advanced economies and G-
20 countries. The results suggest that an increase in uncertainty-driven overoptimism has
dampening effects on next-year real GDP growth rates. This implies that incorporating the
common structure governing forecast errors across countries can help improve subsequent