Macroeconomic forecasts are traditionally stated as point estimates. Retrospective evaluations of forecasts usually assume that the cost of a forecast error increases with the arithmetic magnitude of the error. As a result, measures such as the root-mean-square error (RSME) or the mean absolute...

Why are forecasts of inflation from VAR models so much worse than their forecasts of real variables? This paper documents that relatively poor performance, and finds that the price equation of a VAR model fitted to U.S. postwar data is poorly specified. Statistical work by other authors has...