Conservatism and information rigidity of the European Bank for Reconstruction and Development's growth forecast: Quarter-century assessment

Abstract

This study assesses the performance of the GDP growth forecasts by the European Bank for Reconstruction and Development for 38 countries between 1994 and 2019. It presents the following results. First, forecast performances improved over time. Second, the projections were mostly conservative, except for some countries with optimistic next-year forecasts. Third, these forecasts were broadly rational once asymmetric loss was assumed. Fourth, the magnitude of improvement in forecast performance, conservativeness, and optimism were likely to differ across regions, Commonwealth of Independent States membership status, and income levels. Fifth, information rigidity was mostly found to be present. Sixth, there was less information rigidity in the short-term horizon in recent years, suggesting that improvement in the European Bank for Reconstruction and Development's forecasting practice and expanded information availability in transition economies enhanced its efficiency.