Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5052676 | Economic Analysis and Policy | 2017 | 11 Pages |
Abstract
Policy makers at the Federal Reserve must make decisions on less than perfect information. To the extent their forecasts are incorrect, policy decisions will also be incorrect. Unfortunately, economic forecasters have a relatively poor record and have not improved as much as one would hope. The research presented in this paper examines one potential source of forecast improvement, economic policy uncertainty. Modeling emotional responses of economic agents to uncertainty is difficult but the inclusion of a policy uncertainty variable could reduce forecast errors of the FOMC's consensus forecast by as much as 20%.
Related Topics
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Economics and Econometrics
Authors
Adam T. Jones, Richard E. Ogden,