An empirical investigation of the effects of rounding on the SPF probabilities of decine and output growth histograms

Clements, M. P. ORCID: https://orcid.org/0000-0001-6329-1341 (2011) An empirical investigation of the effects of rounding on the SPF probabilities of decine and output growth histograms. Journal of Money, Credit and Banking, 43 (1). pp. 207-220. ISSN 1538-4616 doi: 10.1111/j.1538-4616.2010.00371.x

Abstract/Summary

I consider the possibility that respondents to the Survey of Professional Forecasters round their probability forecasts of the event that real output will decline in the future, as well as their reported output growth probability distributions. I make various plausible assumptions about respondents’ rounding practices, and show how these impinge upon the apparent mismatch between probability forecasts of a decline in output and the probabilities of this event implied by the annual output growth histograms. I find that rounding accounts for about a quarter of the inconsistent pairs of forecasts.