02395cas a2200325 a 4500 AALejournalIMF022173 230101c9999 xx r poo 0 0eng d 5.00 USD 9781616356392 1018-5941 BD-DhAAL BD-DhAAL Carriere-Swallow, Yan. Macrofinancial Causes of Optimism in Growth Forecasts / Yan Carriere-Swallow, Jose Marzluf. Washington, D.C. : International Monetary Fund, 2021. 1 online resource (22 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students We analyze the causes of the apparent bias towards optimism in growth forecasts underpinning the design of IMF-supported programs, which has been documented in the literature. We find that financial variables observable to forecasters are strong predictors of growth forecast errors. The greater the expansion of the credit-to-GDP gap in the years preceding a program, the greater its over-optimism about growth over the next two years. This result is strongest among forecasts that were most optimistic, where errors are also increasing in the economy's degree of liability dollarization. We find that the inefficient use of financial information applies to growth forecasts more broadly, including the IMF's forecasts in the World Economic Outlook and those produced by professional forecasters compiled by Consensus Economics. We conclude that improved macrofinancial analysis represents a promising avenue for reducing over-optimism in growth forecasts. Mode of access: Internet Financial Markets and The Macroeconomy imf Forecasting and Other Model Applications imf International Finance Forecasting and Simulation imf International Monetary Arrangements and Institutions imf Macroeconomic Forecasting imf Macroeconomics imf Marzluf, Jose. IMF Working Papers; Working Paper ; No. 2021/275 Full text available on IMF http://elibrary.imf.org/view/journals/001/2021/275/001.2021.issue-275-en.xml IMF e-Library