Ongoing Projects

Electoral Cycles in Macroeconomic Forecasts

This paper documents the existence of Political Forecast Cycles. In a theoretical model of political selection, we show that governments release overly optimistic GDP growth forecasts ahead of elections to increase the reelection probability. The bias arises from lack of commitment if voters are rational and from manipulation of voters’ beliefs if they do not expect the incumbent to be biased. Using high-frequency forecaster-level data from the United States, the United Kingdom, and Sweden, we document that governments overestimate short-term GDP growth by 10 to 13 percent during campaign periods.

(with Davide Cipullo) Latest version CESifo Working Paper No. 9088

Biased Forecasts to Affect Voting Decisions? The Brexit Case

This paper explores whether macroeconomic forecasters use their forecasts to influence voting outcomes. We develop a theoretical model in which voters have to choose between remaining in the status quo and leaving it for an alternative. Voters rely on a macroeconomic forecaster that has preferences over a referendum outcome to form beliefs about the future states of the economy. The model yields four main predictions. First, the forecaster will release biased estimates as the vote approaches. Second, the forecaster will release biased estimates after the vote to preserve the credibility of its estimates. Third, the bias in the forecasts subject to the alternative state will dominate the bias in the forecasts subject to the status quo. Fourth, an increase in the forecaster's stakes in the voting outcome will lead to more biased estimates. All theoretical predictions are shown to be empirically supported in the context of the Brexit referendum.

(with Davide Cipullo) Latest version Uppsala University Working Paper Series (March 2019)

Inefficient Use of Competitors’ Forecasts?

Do forecasters use competitors’ forecasts efficiently? Empirical results using a large panel of forecasters suggest that forecasters underuse information from their competitors in their estimates for current and next year’s annual GDP growth and inflation. The results also show that forecasters pay more attention to their competitors when releasing short-term forecasts compared to medium-term forecasts. A baseline model with noisy and private information supports the underuse interpretation and predicts that it is optimal to pay considerable attention to competitors’ work. The theoretical framework also rules out overconfidence as the primary explanation of the observed behavior. When the model is extended to include a revision cost, it can only explain the observed inefficiency and horizon dependency if asymmetric horizon discounting between revisions and forecast errors is assumed.

Latest version Sveriges Riksbank Working Paper Series (October 2019)

Journal Publications

Withering Cash: Is Sweden ahead of the curve or just special?

Forthcoming in the International Journal of Central Banking

Cash in circulation has increased in most countries but has fallen dramatically in Sweden. We explore the drivers behind this development using panel data consisting of 129 countries. In line with the previous literature, we find that GDP, demography, and the interest rate are key explanatory variables. A new finding is that lower corruption is associated with lower demand for cash in developed countries. Our empirical model performs relatively well in explaining the developments in most OECD countries. However, our model cannot explain the divergent Swedish development. We argue that a unique combination of events and policy measures have led to the decline of cash in Sweden.

(with Hanna Armelius & Carl Andreas Claussen) Latest version Sveriges Riksbank Working Paper Series (August 2020) Column (Sep. 2020)

Adjusting for Information Content when Comparing Forecast Performance

Journal of Forecasting, 36, 784–794, 2017

Cross‐institutional forecast evaluations may be severely distorted by the fact that forecasts are made at different points in time and therefore with different amounts of information. This paper proposes a method to account for these differences when analyzing an unbalanced panel of forecasts. The method computes the timing effect and the forecaster's ability simultaneously. Monte Carlo simulation demonstrates that evaluations that do not adjust for the differences in information content may be misleading. In addition, the method is applied to a real‐world dataset of 10 Swedish forecasters for the period 1999–2015. The results show that the ranking of the forecasters is affected by the proposed adjustment.

(with Michael K. Andersson & Ted Aranki) Published Paper Riksbank WP 2016 Code

Other Publications

Kommentar på Johan Lönnroths artikel "Brev till den parlamentariska riksbankskommittén"

Ekonomisk Debatt 5/2018 (with Jesper Lindé)Swedish

Do Swedish Forecasters Properly Account for Sweden’s International Dependence?

Sveriges Riksbank Economic Review 2017:2 (with Jesper Lindé)English, Swedish

It’s a myth that the Riksbank’s forecasts have been governed by models

Sveriges Riksbank Economic Review 2017:1 (with Jesper Lindé)English, Swedish

En myt att Riksbankens prognoser styrts av modeller

Ekonomisk Debatt 8/2016 (with Jesper Lindé)Swedish

An assessment of the Riksbank’s international forecasts

Economic Commentaries, No. 14, 2015, Sveriges Riksbank (with Ted Aranki)English, Swedish

Interest and inflation rates through the lens of the theory of Irving Fisher

Sveriges Riksbank Economic Review 2015:2 (with Magnus Jonsson)English, Swedish

Ph.D. Thesis

Electoral Incentives and Information Content in Macroeconomic Forecasts

Economic studies 193, Department of Economics, Uppsala University, 2021Thesis