Rossi, Barbara, 1971-Sekhposyan, Tatevik2016-05-022017-01-252016Rossi B, Sekhposyan T. Forecast rationality tests in the presence of instabilities, with applications to Federal Reserve and Survey Forecasts. Journal of Applied Econometrics. 2016;31(3):507-32. DOI: 10.1002/jae.24400883-7252http://hdl.handle.net/10230/26235This paper proposes a framework to implement regression-based tests of predictive ability in unstable environments, including, in particular, forecast unbiasedness and efficiency tests, commonly referred to as tests of forecast rationality. Our framework is general: it can be applied to model-based forecasts obtained either with recursive or rolling window estimation schemes, as well as to forecasts that are model free. The proposed tests provide more evidence against forecast rationality than previously found in the Federal Reserve's Greenbook forecasts as well as survey-based private forecasts. It confirms, however, that the Federal Reserve has additional information about current and future states of the economy relative to market participants.application/pdfengThis is the pre-peer reviewed version of the following article: Rossi B, Sekhposyan T. Forecast rationality tests in the presence of instabilities, with applications to Federal Reserve and Survey Forecasts. Journal of Applied Econometrics. 2016;31(3):507-32, which has been published in final form at http://dx.doi.org/10.1002/jae.2440. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.info:eu-repo/semantics/articlehttp://dx.doi.org/10.1002/jae.2440Forecasting rationalityRegression-based tests of forecasting abilityGreenbook forecastsSurvey forecastsReal-time datainfo:eu-repo/semantics/openAccess