Narrow Your Choices

Refine By Countries

Refine By Topic

Refine By Series

Refine By Language

Refine By Date

—

Refine By IMF Taxonomy

Refine By JEL Taxonomy

Refine by LOC Taxonomy

Refine By THEMA Taxonomy

  • Print
  • Save

Browse

You are looking at 1 - 1 of 1 items for :

  • Type: Journal Issue x
  • Lao People's Democratic Republic x
  • Population and demographics x
  • Economic forecasting x
  • Earth Sciences, Geography, Environment x
  • IMF Working Papers x
  • Macroeconomics and Monetary Economics x
Clear All Modify Search
Cover IMF Working Papers
Overfitting in Judgment-based Economic Forecasts: The Case of IMF Growth Projections
Klaus-Peter Hellwig
I regress real GDP growth rates on the IMF’s growth forecasts and find that IMF forecasts behave similarly to those generated by overfitted models, placing too much weight on observable predictors and underestimating the forces of mean reversion. I identify several such variables that explain forecasts well but are not predictors of actual growth. I show that, at long horizons, IMF forecasts are little better than a forecasting rule that uses no information other than the historical global sample average growth rate (i.e., a constant). Given the large noise component in forecasts, particularly at longer horizons, the paper calls into question the usefulness of judgment-based medium and long-run forecasts for policy analysis, including for debt sustainability assessments, and points to statistical methods to improve forecast accuracy by taking into account the risk of overfitting.
Keywords:
WP; growth projection; WEO forecast; LASSO coefficient; bootstrapped sample; shrinkage coefficient; Forecasting; GDP growth; machine learning; Personal income; Real exchange rates; Emerging and frontier financial markets; Population growth; Global; inflation dynamics; IMF growth projection; Euro area inflation dynamics; copyright page; area inflation dynamics; Income