Are forecasters reluctant to revise their predictions? Some German evidence

Gebhard Kirchgässner, Ulrich K. Müller

Research output: Contribution to journalArticle

13 Scopus citations

Abstract

People are reluctant to admit mistakes. This could also be true of economic forecasters. If revisions of past forecasts are costly, then it will become optimal for forecasters to only partially adjust a past forecast in the light of new information. The unwillingness to admit to the mistake in the old forecast generates a bias of the new forecast in the direction of the old forecast. We test this hypothesis for the joint predictions of the Association of German Economic Research Institutes over the last 35 years. We find some evidence for such a bias and compute the implied unwillingness to revise forecasts.

Original languageEnglish (US)
Pages (from-to)401-413
Number of pages13
JournalJournal of Forecasting
Volume25
Issue number6
DOIs
StatePublished - Sep 1 2006

All Science Journal Classification (ASJC) codes

  • Modeling and Simulation
  • Computer Science Applications
  • Strategy and Management
  • Statistics, Probability and Uncertainty
  • Management Science and Operations Research

Keywords

  • Adjustment cost
  • Forecast rationality
  • Forecast revisions

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