Is a group of economists better than one? Than none?
Can economists forecast the direction of economic growth? Casual observation indicates that individual economists make poor predictions of economic growth and that their forecasts are highly correlated. This article discusses the loss of information resulting from correlation and develops a method of combining forecasts that are cross-sectionally correlated. This approach greatly increases the accuracy of near-term forecasts of the direction of economic growth, although the individual with the best historical performance is better over longer horizons. Overall, when the data are properly aggregated, economists predict the direction of near-term economic growth and call turning points reasonably well.
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