A new approach for evaluating economic forecasts

This paper presents a recently developed approach for evaluating economic forecasts. Previously. univariate methods were used to evaluate the forecasts of individual variables. However, many macroeconomic variables are forecast at the same time to describe the state of the economy It is. therefore, appropriate to use a multivariate methodology in evaluating these forecasts. Our approach uses VARs and distance measures. It is applied to the Survey of Professional Forecasters (SPF). Our contributions are the application of the methodology for evaluating multivariate forecasts to the SPF, measuring accuracy, and testing for bias within this framework. We also consider whether there are forecasting performance asymmetries over the business cycle.