Forecast diversity in economic models may drive economic fluctuations.
The article looks at how accurate and varied forecasts are for the U.S. economy's growth and inflation during recessions. Six different models were used to make forecasts, which were then compared to professional forecasts. Surprisingly, the model forecasts were close to the professional forecasts in accuracy, especially at three to four quarters ahead and during recoveries. Both model and professional forecasts showed similar levels of variation, which can impact economic fluctuations. The differences in forecasts were due to various modeling assumptions, information used, and parameter estimates.