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CBO
REPORT

CBO's Economic Forecasting Record
An evaluation of the economic forecasts
CBO made from January 1976 through January 2002
September 2004





                
Preface

The Congressional Budget Office (CBO) regularly publishes evaluations of the accuracy of its economic and budget forecasts. Those evaluations help guide CBO's efforts to improve its forecasts and also assist Members of Congress in their use of CBO's estimates.

This report was prepared by Tumi Coker and Adam Gordon, with the assistance of colleagues in the Macroeconomic Analysis Division, under the direction of Kim Kowalewski and Robert Dennis. Christine Bogusz edited the report, Maureen Costantino prepared it for publication, and Annette Kalicki produced the electronic versions for CBO's Web site.

Douglas Holtz-Eakin
Director
September 2004




CONTENTS


Sources and Choice of Data for the Evaluation
 
Measuring the Quality of Forecasts
      Bias
      Accuracy
      Alternative Measures of Forecast Quality
 
Limitations of Forecast Evaluations
 
The Effects of Business Cycles and Changes in the Trend Rate of Productivity Growth
 
CBO's Forecasting Record
      Two-Year Forecasts
      Five-Year Projections
 
Appendix: Choosing Sources of Historical and Forecast Data

Tables
   
1A.  Summary Measures of Forecast Performance for Two-Year Averages
1B.  Summary Measures of Forecast Performance for Five-Year Averages
2.  CBO, Administration, and Blue Chip Forecasts of Two-Year Average Growth Rates for Real Output
3.  Comparison of CBO, Administration, and Blue Chip Forecasts of Two-Year Average Growth Rates for Nominal Output
4.  CBO, Administration, and Blue Chip Forecasts of Two-Year Average Inflation in the Consumer Price Index
5.  CBO, Administration, and Blue Chip Forecasts of Two-Year Average Nominal Interest Rates on Three-Month Treasury Bills
6.  CBO, Administration, and Blue Chip Forecasts of Two-Year Averages for Nominal Long-Term Interest Rates
7.  CBO, Administration, and Blue Chip Forecasts of Two-Year Average Real Interest Rates on Three-Month Treasury Bills
8.  CBO, Administration, and Blue Chip Forecasts of the Difference Between Two-Year Average Inflation in the CPI and in the GNP or GDP Price Index
9.  CBO and Administration Forecasts of the Two-Year Change in Wage and Salary Disbursements plus Corporate Book Profits as a Share of Output
10.  CBO, Administration, and Blue Chip Projections of Five-Year Average Growth Rates for Real Output
11.  CBO, Administration, and Blue Chip Projections of Five-Year Average Growth Rates for Nominal Output
12.  Comparison of CBO, Administration, and Blue Chip Projections of the Difference Between Five-Year Average Inflation in the CPI and in the GNP or GDP Price Index
13.  CBO and Administration Projections of the Five-Year Change in Wage and Salary Disbursements plus Corporate Book Profits as a Share of Output
   
Figures
   
1.  Statistical Discrepancy in the National Income and Product Accounts
2.  Fringe Benefits
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