This month's featured article
The accuracy of long-term growth forecasts by economics researchers
MORIKAWA MasayukiVice President, RIETI
The accuracy of long-term macroeconomic forecasts substantially affects the sustainability of government debt and social security systems. However, long-term forecasts cannot avoid significant uncertainty because the future developments of new innovations and their diffusion are difficult to assess quantitatively. In addition, many unforeseeable events such as financial crises, international conflicts, and major natural disasters occur.
Many studies have indicated that economic growth forecasts by government agencies tend to be biased upward. In the case of Japan since the fiscal year 2000, the government's GDP growth forecast for the next fiscal year has, on average, had an upward bias of 0.5 percentage points and 1.4 percentage points for real and nominal GDP growth rates, respectively. The upward bias in economic growth forecasts often causes optimistic bias in the projections of fiscal balance and debt level. However, these studies have mostly focused on short-term forecasts of one or two years.
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