Evaluating the Efficiency of FOMC's New Economic Projections

Abstract

Since 2007, FOMC policymakers have been publishing detailed numerical projections of macroeconomic series over the next three years. By testing whether the revisions to these projections are unpredictable, I find that FOMC’s efficiency is generally accepted for inflation, but often rejected for real economic variables, notably for the unemployment rate. The rejection is due to the strong autocorrelation of revisions, which reflects the rigidity of FOMC’s forecasts about unemployment. The joint efficiency of the entire projection is accepted in most cases.