The FOMC versus the staff, revisited: When do policymakers add value?

The Board of Governors staff and the Federal Open Market Committee both publish macroeconomic forecasts. Romer and Romer (2008) show that policymakers' attempts to add information to the staff forecasts are counterproductive. In more recent years, however, policymakers have improved upon staff forecasts. We show that policymakers' value-added in forecasting is greater when economic conditions are unfavorable or uncertain.