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Title: Business cycle asymmetry and unemployment rate forecasts Authors:  Simon van Norden - HEC Montreal (Canada) [presenting]
Abstract: Asymmetries in unemployment dynamics have been observed in the time series of a number of countries, including the United States. Asymmetries in unemployment rate forecast errors are studied. We consider conditions under which optimal forecasts will display asymmetrically-distributed errors and how the degree of asymmetry might vary with forecast horizon. Using data from the U.S. Survey of Professional Forecasters and the Federal Reserve Greenbook, we find substantial evidence of forecast error asymmetry, which tends to increase with the forecast horizons; we also find noteworthy differences in forecasts from these two sources. The results give insight into the ability of professional forecasters to adapt their forecasts to asymmetry in underlying processes.