John Silvia

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Presentation to FDIC Economic Outlook Panel
Art of Forecasting The Financial Economy
John Silvia Chief Economist December 12, 2003
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Blue Chip Consensus performs better than any
individual forecaster. Average of forecasts
reduces noise/bias of individual
forecasters Access to independent
information Auto, Housing, Sectors Regional
Influences Forecast Evaluation with
Cross-Sectional Data The Blue Chip Surveys,
Bauer et. Al., FRB-Atlanta Economic Review,
Second Quarter 2003
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Error Persistence second Half of 1990s GDP,
Unemployment Rate, Inflation Underreported GDP
when inflation, Interest Rates Low Inefficient
Forecasts Scott Schuh, An Evaluation of
Recent Macroeconomic Forecast Errors, Forecasts
Unbiased but Inefficient Structural Change
Inflation, Unemployment and Nominal Interest Rate
Error Correlated. New England Economic Review,
Jan/Feb 2001
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Second Half of 1990s Forecast Errors Persist
GDP, Unemployment Rate Errors biased over short
periods Inflation Underpredict 1970s On Track
1990s Inefficient Forecasts Data on Inflation,
Nominal Interest Rate Improves, GDP forecast Not
All Information on Inflation and Interest Rates
are Incorporated into Average GDP Forecasts.
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Financial Risk
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Bank Lending
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