Evaluation of the Ministry of Finance’s Forecast History

Abstract

This paper evaluates the accuracy of macroeconomic economic forecasts of the Ministry of Finance of the Czech Republic using the average forecasting error, the mean absolute error and Theil’s inequality coeffi cient. The paper analyses the forecast accuracy of the main macroeconomic indicators – real GDP growth, nominal GDP growth, GDP defl ator growth, real private consumption growth, average infl ation rate, average unemployment rate and current account balance to GDP Ratio. The forecast accuracy is also assessed using the modifi ed Diebold and Mariano test, which compares the accuracy of two forecasts under the null hypothesis that assumes no diff erences in accuracy. Last but not least, the paper compares the accuracy of the forecasts of the Ministry of Finance to those of the European Commission, Organization for Economic Co-operation and Development and International Monetary Fund.

Keywords

• The accuracy of macroeconomic forecasts; the average forecasting error
• the mean absolute error
• Theil’s inequality coefficient
• the naďve forecast
• modified Diebold-Mariano test