Uncertainty Measures from Partially Rounded Probabilistic Forecast Surveys

Glas A, Hartmann M (2022)

Publication Language: English

Publication Type: Journal article

Publication year: 2022

Journal

Quantitative Economics Econometric Society / Wiley-Blackwell: No OnlineOpen

Book Volume: 13

Pages Range: 979-1022

Article Number: 13 (3)

Journal Issue: 3

DOI: 10.3982/QE1703

Abstract

Although survey-based point predictions have been found to outperform successful forecasting models, corresponding variance forecasts are frequently diagnosed as heavily distorted. Forecasters who report inconspicuously low ex-ante variances often produce squared forecast errors that are much larger on average. In this paper, we document the novel stylized fact that this variance misalignment is related to the rounding behavior of survey participants. Rounding may reflect the fact that some survey participants employ a rather judgmental approach to forecasting as opposed to using a formal model. We use the distinct numerical accuracies of panelists’ reported probabilities as a means to propose several alternative and easily implementable corrections that i) can be carried out in real time, i.e., before outcomes are observed, and ii) deliver a significantly improved match between ex-ante and ex-post forecast uncertainty. According to our estimates, uncertainty about inflation, output growth and unemployment in the U.S. and the Euro area is higher after correcting for the rounding effect. The increase in the share of non-rounded responses in recent years also helps to understand the trajectory of survey-based average uncertainty during the years since the financial and sovereign debt crisis.

Authors with CRIS profile

Alexander Glas Lehrstuhl für Statistik und Ökonometrie

Involved external institutions

Ruprecht-Karls-Universität Heidelberg DE Germany (DE)

How to cite

APA:

Glas, A., & Hartmann, M. (2022). Uncertainty Measures from Partially Rounded Probabilistic Forecast Surveys. Quantitative Economics, 13(3), 979-1022. https://dx.doi.org/10.3982/QE1703

MLA:

Glas, Alexander, and Matthias Hartmann. "Uncertainty Measures from Partially Rounded Probabilistic Forecast Surveys." Quantitative Economics 13.3 (2022): 979-1022.

BibTeX: Download