Macroeconomic forecasts under the prism of error-correction models

When the error correction term exhibits persistence, its change may convey useful information about short-run economic dynamics which, if not taken sufficiently into account by a forecasting model, may be associated with predictable forecast errors. Such errors are documented in the DRI forecasts for the U.S. consumption, GNP and imports. The strong results, together with the very general assumptions behind the conceptual framework, suggest that similar predictable errors may be pervasive in the forecasts of other large-scale econometric models.