Diagnostics for evaluating the value and rationality of economic forecasts

A number of studies have sought to determine whether economic forecasts had predictive value. These analyses used a single statistical methodology based on the independence of the actual and predicted changes. This paper questions whether the observed results are robust if alternative statistical methodologies are used to analyze this question. Procedures suggested by Cumby and Modest as well as rationality tests are applied to two data sets. Sometimes the conclusions differ depending on the procedures that are used. The results yield a guideline for the diagnostics that should be employed in testing for the value of economic forecasts.