Appendix II.3. A Comparison of Forecaster Types

Appendix II.3. A Comparison of Forecaster Types

The type of forecaster may influence the magnitude of forecast errors or the optimism of forecasts. To take this into account, dummy variables are created to account for the different categorizations of forecasters.

Ì Institutional Categorization Regression

Forecasters are divided into three categories based on the source of the forecast errors. These include the IMF (WEO dataset), the World Bank (GEP dataset) and private forecasters (Consensus/Focus Economics datasets). January GDP growth forecasts are used for the analysis across all forecaster types. Private forecasts are obtained from two sources. Forecasts for the MENA region are obtained from Focus Economics, while the private forecasts from the rest of the world are source from the Consensus Economics dataset. Equations (AII.2.1) and (AII.2.2) (Appendix II.2) are altered to include them as follows:

AbsFcstErri,t,f = α + β1 LogSCIi,t–1 + β2 LogGDPpci,t–1 + β3 AbsLogExpPricesi,t + β4 InternalConflicti,t–1 + β5 LogPopi,t–1 + β6 Boomi,t–1 + β7 IMF_Dummyf + β8 Consensus_Dummyf + τt + εi,t (AII.3.1)

FcstErri,t,f = α + β1 LogSCIi,t–1 + β2 LogGDPpci,t–1 + β3 LogExpPricesi,t + β4 InternalConflicti,t–1 + β5 LogPopi,t–1 + β6 Boomi,t–1 + β7 IMF_Dummyf + β8 ConsFocus_Dummyf + τt + εi,t (AII.3.2)

where i is for country; t is for year; and f is for forecaster. A dummy is created for IMF forecasts (IMF_Dummy) and Consensus/Focus Economics-sourced forecasts (ConsFocus_Dummy). World Bank-sourced forecasts are the omitted comparison category (to avoid multicollinearity).

Ì Geographic Categorization Regression

Individual forecasters are also categorized based on their geographic proximity to the countries they are forecasting. This proximity is determined by the location of the headquarters of the forecaster. The three categories are Local (the headquarters country is the same as the country being forecasted), Regional (the headquarters country is in the same region as the country being forecasted, based on the World Bank regional categorization) and International (if the headquarters country and the country being forecasted are not geographically related using Local or Regional definitions). The World Bank and the IMF forecasts are classified as International. Equations AII.3.1 and AII.3.2 are altered as follows: The IMF and Consensus dummy variables are replaced by dummy variables created for regional forecasters (Regional_Dummy) and for the international forecasters (Intl_Dummy). Local forecasters is the comparison category that is excluded from the regressions.

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