How informative are the subjective density forecasts of macroeconomists?

In this paper, we propose a framework to evaluate the subjective density forecasts of macroeconomists using micro data from the euro area Survey of Professional Forecasters (SPF). A key aspect of our analysis is the evaluation of the entire predictive densities, including an evaluation of the impact of density features such as location, spread, skew and tail risk on density forecast performance. Overall, we find considerable heterogeneity in the performance of the surveyed densities at the individual level. Relative to a set of simple benchmarks, this performance is somewhat better for GDP growth than for inflation, although in the former case it diminishes substantially with the forecast horizon. In addition, we report evidence of some improvement in the relative performance of expert densities during the recent period of macroeconomic volatility. However, our analysis also reveals clear evidence of overconfidence or neglected risks in expert probability assessments, as reflected in frequent occurrences of events which are assigned a zero probability. Moreover, higher moment features of expert densities, such as skew or the degree of probability mass in their tails, are shown not to contribute significantly to improvements in individual density forecast performance.