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Using a large international data set we analyze whether business cycle forecasters tend to herd or anti-herd. Applying different measures of economic crises, we distinguish between normal economic circumstances and times of crises. We fnd evidence for anti-herding behavior for most industrial economies, i.e. forecasters eliberately stick out their neck with extreme forecasts for strategic reasons. For a set of emerging market economies, by contrast, we find evidence for herding behavior. We relate this finding to the high incidence of economic and financial crises in these countries. A test for herding behavior during economic crises confirms that forecasters tend to herd in times of high forecast uncertainty.
In this paper, we study the bias in interest rate projections for four central banks, namely for Czech Republic, New Zealand, Norway, and Sweden. We examine whether central bank projections are based on an asymmetric loss function and report evidence that central banks perceive an overprojection of their longer-term interest rate forecasts as twice as costly as an underprojection of the same size. We document that rationality is consistent with biased interest rate projections which contribute to explaining the central banks’ behavior.
We used the oil-price forecasts of the 'Survey of Professional Forecasters' published by the European Central Bank to analyze whether oil-price forecasters herd or anti-herd. Oil-price forecasts are consistent with herding (anti-herding) of forecasters if forecasts are biased towards (away from) the consensus forecast. Based on a new empirical test developed by Bernhardt et al. (J. Financ. Econ. 80: 657-675, 2006), we found strong evidence of anti-herding among oil-price forecasters.
We use data from the Consensus Economics Forecast Poll to analyze how current account forecasters form expectations. Our results suggest that forecasts do not satisfy traditional unbiasedness and orthogonality criteria for forecast rationality. In addition, we find anti-herding behavior among forecasters for the Euro area and G7 countries. We also show that the cross-sectional heterogeneity in anti-herding is associated with cross-sectional heterogeneity in forecast accuracy. More specifically, we find some evidence indicating that forecasters who tend to herd provide more accurate forecasts than their colleagues who follow an anti-herding strategy.