Professional economic forecasts: Are they worth their costs?

Most economic forecast evaluations dating back 20 years show that professional forecasters add little to the forecasts generated by the simplest of models. Using various types of forecast error criteria, these evaluations usually conclude that the professional forecasts are little better than the no-change or ARIMA type forecast. It is contented that this conclusion is mistaken because the conventional error criteria may not capture why forecasts are made or how they are used. Using forecast directional accuracy, the criterion which has been found to be highly correlated with profits in an interest rate setting, it is found that professional GNP forecasts dominate the cheaper alternatives. Moreover, there appears to be no systematic relationship between this preferred criterion and the error measures used in previous studies.