International Journal of Forecasting xxx (xxxx) xxx

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International Journal of Forecasting

journal homepage: www.elsevier.com/locate/ijforecast

High-frequency credit spread information and

macroeconomic forecast revision
∗
Bruno Deschamps a , Christos Ioannidis b , Kook Ka c ,
a
Nottingham University Business School China, University of Nottingham Ningbo China, 199 Taikang East
Road, Ningbo, 315100, China
b
Aston Business School, Aston University, Birmingham, B4 7ET, United Kingdom
c
Economic Research Institute, Bank of Korea, Seoul, 04514, Republic of Korea

article info a b s t r a c t

Keywords: We examine whether professional forecasters incorporate high-frequency information

Forecast revision about credit conditions when revising their economic forecasts. Using a mixed data
GDP forecast sampling regression approach, we find that daily credit spreads have significant pre-
Credit spread
dictive ability for monthly forecast revisions of output growth, at both the aggregate
High-frequency data
and individual forecast levels. The relationships are shown to be notably strong during
Mixed data sampling (MIDAS)
‘bad’ economic conditions, which suggests that forecasters anticipate more pronounced
effects of credit tightening during economic downturns, indicating an amplification
effect of financial developments on macroeconomic aggregates. The forecasts do not
incorporate all financial information received in equal measures, implying the presence
of information rigidities in the incorporation of credit spread information.
© 2019 International Institute of Forecasters. Published by Elsevier B.V. All rights reserved.

1. Introduction outcomes and incorporating newly-available information.

The prediction of future economic activity is of great
interest to both individuals and policy makers, as eco-
nomic activities are in fact influenced by the expectations
of market participants. Policy makers in central banks
and governments produce forecasts of the main macroe-
conomic variables upon which to base their monetary
and fiscal policy responses, while at the same time the
published predictions provide useful information for eco-
nomic agents when making everyday economic decisions.
Among the various sources of economic predictions, pro-
fessional forecast surveys are reported widely, as they
integrate a number of individual forecasters’ predictions
of several variables and are updated regularly, being pub-
lished usually on a monthly or quarterly basis.
Forecasters make and revise their forecasts through
sequences of updated surveys by reflecting on actual data
∗ Corresponding author.
E-mail addresses: bruno.deschamps@nottingham.edu.cn
(B. Deschamps), c.ioannidis@aston.ac.uk (C. Ioannidis),
kakook@bok.or.kr (K. Ka).
This structure of economic surveys, in which initial fore-
casts are followed by periodic updates, has initiated a
large body of literature examining the expectations for-
mation process, which has found that survey forecasts fail
the full-information rational expectations hypothesis.
Nordhaus (1987) demonstrated the failure of forecast
efficiency by showing that the forecast errors and revi-
sions are correlated with past forecast revisions. Forecast
efficiency has been tested in numerous studies, most of
which have rejected weak-form efficiency in both consen-
sus forecasts (see for example Ager, Kappler, & Osterloh,
2009; Capistrán & López-Moctezuma, 2014; Isiklar, Lahiri,
& Loungani, 2006) and individual forecasts (Andrade &
Le Bihan, 2013; Deschamps & Ioannidis, 2013; Dovern &
Weisser, 2011; Gallo, Granger, & Jeon, 2002). With only
a few exceptions such as that of Clements (1997), most
studies have found positive coefficients on lagged revi-
sions, implying that forecasts are not updated sufficiently
when new information is received.
Recent studies have focused on the linkages between
forecast smoothing and models of information rigidities.

https://doi.org/10.1016/j.ijforecast.2019.04.023
0169-2070/© 2019 International Institute of Forecasters. Published by Elsevier B.V. All rights reserved.

Please cite this article as: B. Deschamps, C. Ioannidis and K. Ka, High-frequency credit spread information and macroeconomic forecast revision. Interna-
tional Journal of Forecasting (2019), https://doi.org/10.1016/j.ijforecast.2019.04.023.
2 B. Deschamps, C. Ioannidis and K. Ka / International Journal of Forecasting xxx (xxxx) xxx
For example, Dovern, Fritsche, Loungani, and Tamirisa
(2015) examine information rigidities in GDP growth fore-
casts and show that forecast revision dynamics are in line
with the predictions of noisy information models (Sims,
2003; Woodford, 2001). Similar conclusions are reached
by Coibion and Gorodnichenko (2012, 2015a).1
Instead of testing the informational rigidities for weak-
form forecast efficiency, this paper directly examines the
ways in which forecasters incorporate high-frequency in-
formation from financial markets when making predic-
tions at both the consensus and individual levels. Specifi-
cally, we explore whether forecasts respond to changes in
credit spreads and test whether this relationship is con-
sistent with what theory and empirical studies imply. We
use the data set of survey forecasts for the US from Con-
sensus Economics, which comprises monthly predictions
made by a panel of professional forecasting institutions.
We enable the use of high-frequency financial market
data in a model for explaining low-frequency forecast
revisions by adopting the mixed data sampling (MIDAS)
framework proposed by Ghysels, Santa-Clara, and Valka-
nov (2004) and Ghysels, Sinko, and Valkanov (2007). This
framework uses weighting functions with only a few hy-
perparameters, such as distributed lag polynomials. The
MIDAS regression enables us to relate variables with dif-
ferent frequencies by reducing the number of parameters
that require estimation. The method, which focused ini-
tially on financial applications (see for example Alper,
Fendoglu, & Saltoglu, 2008; Chen & Ghysels, 2010; Ghy-
sels et al., 2007), has been applied recently to improving
the forecasts of low-frequency macroeconomic variables,
such as GDP growth, with the aid of higher-frequency
macroeconomic and financial data. For instance, Clements
and Galvão (2008) demonstrate a significant reduction
in RMSE by using monthly indicators to forecast quar-
terly output growth in a MIDAS specification.2 Andreou,
Ghysels, and Kourtellos (2013) incorporate information
from daily financial data when forecasting the quarterly
GDP, and demonstrate that adding high-frequency finan-
cial information to the model delivers superior forecast-
ing performances. There are two reasons for using high-
frequency daily asset prices with the MIDAS framework.
First, even though the information sources and method-
ologies that underlie the survey forecasts are largely un-
known, it is reasonable to expect that forecasters who
update their forecasts at short intervals (in our case, on a
monthly basis) will endeavour to utilize information from
high-frequency economic news. As financial asset prices
are forward-looking in nature and reflect expectations
about future economic activity, they incorporate all high-
frequency information in a timely manner. The common
1 Other studies examining information rigidities in survey forecasts
include those by Andrade and Le Bihan (2013), Dräger and Lamla
(2012), Hur and Kim (2016) and Loungani, Stekler, and Tamirisa (2013).
2 Other articles linking low-frequency macroeconomic series with
high-frequency macroeconomic or financial data include those by
Armesto, Hernández-Murillo, Owyang, and Piger (2009), Breitung and
Roling (2015), Foroni and Marcellino (2014), Galvão (2013), Hamilton
(2008), Kuzin, Marcellino, and Schumacher (2011), Marcellino and
Schumacher (2010), Modugno (2013), Monteforte and Moretti (2013),
and Schumacher and Breitung (2008).
Please cite this article as: B. Deschamps, C. Ioannidis and K. Ka, High-frequency credit spread information and macroeconomic forecast revision. Interna-
tional Journal of Forecasting (2019), https://doi.org/10.1016/j.ijforecast.2019.04.023.
methods of time-aggregating higher-frequency variables,
such as averaging or taking only the latest value, may
result in a loss of efficiency with respect to the use of past
information.
Second, the problem of incomplete information about
the timing of the surveys means that a priori aggrega-
tion schemes for summarising the high-frequency data
may ignore the respondents’ forecasting behaviours when
forming predictions upon the arrival of newly-available
information. Indeed, as was discussed by Ghysels and
Wright (2009), there may exist gaps among the dates
when the forecasters’ information sets are formed, the
dates when the surveys are actually submitted, and the
dates set as the submission deadlines.3 Adopting the MI-
DAS regression resolves these issues, as it relies on a
flexible aggregation function with minimal restrictions,
allowing the use of a data-generated weighting scheme
(see Andreou, Ghysels, & Kourtellos, 2010, for a detailed
discussion).
Our study is related to a large body of literature on the
predictive information for future economic activity that is
contained in financial asset prices.4 For example, in the
tradition of Estrella and Hardouvelis (1991), the ability of
spreads between long- and short-term government bonds
to predict output growth and recessions has long been re-
garded as a stylised fact among economists (see also Ang,
Piazzesi, & Wei, 2006; Dotsey, 1998; Harvey, 1989; Rude-
busch & Williams, 2009; Stock & Watson, 1989; Wright,
2006).
A large body of empirical literature has shown that
credit spreads have predictive power for real activity.
Gertler and Lown (1999) and Mody and Taylor (2004)
show that credit spreads based on high-yield corporate
bonds forecast US GDP growth. Gilchrist, Yankov, and
Zakrajšek (2009) document that the predictive power of
credit spreads is more prominent when using the cor-
porate bonds of intermediate-risk rather than high-risk
firms. The most recent works by Bleaney, Mizen, and
Veleanu (2016), Faust, Gilchrist, Wright, and Zakrajšek
(2013), Gilchrist and Zakrajšek (2012) and Krishnamurthy
and Muir (2015) support the earlier findings that credit
spreads have substantial predictive content, and find that
a component of credit spreads that can be attributed to
deviations from the usual compensation for default risk
strongly predicts a decline in economic activity.
Our paper is also linked to the growing interest in
recent studies in examining the differences in forecast-
ing behaviours under different states of the business cy-
cle.5 For instance, Coibion and Gorodnichenko (2015b)
and Loungani et al. (2013) find that the degree of in-
formation rigidity is lower in recessions than in normal
years. Dovern and Jannsen (2017) find that the forecast
3 We know the dates of the survey deadlines, which do not
exactly match the dates when the forecasters made their forecasts and
answered the surveys.
4 See Stock and Watson (2003) for a comprehensive survey of the
role of asset prices in the forecasting of macroeconomic variables.
5 Other exercises examining state-dependent forecast errors include
those of El-Shagi, Giesen, and Jung (2016), Messina, Sinclair, and Stekler
(2015), Sheng and Wallen (2014), Sinclair, Joutz, and Stekler (2010) and
Xie and Hsu (2016).
 B. Deschamps, C. Ioannidis and K. Ka / International Journal of Forecasting xxx (xxxx) xxx
errors turn positive as the economy recovers from reces-
sions and disappear during expansions, implying a differ-
ential treatment of information depending on the phase
of the business cycle.
Our findings can be summarised as follows. First, fore-
casts are impacted negatively by credit spreads, as is
consistent with the predictions of the theory. An increase
in daily credit spreads — the difference between the yields
on an index of seasoned long-term Aaa-rated corporate
bonds and on constant-maturity 10-year Treasuries —
is associated with significant negative values of consen-
sus forecast revisions of US GDP growth. Second, the
weighting functions in MIDAS regressions show hump-
shaped weights. Forecast revisions respond more strongly
to 10- to 15-day-old credit spread information than to
the most recent information, indicating that forecasts are
slow to incorporate high-frequency financial information.
This result is consistent with models of information rigidi-
ties (Coibion & Gorodnichenko, 2012, 2015a), and with
models of sticky information in particular (Mankiw & Reis,
2002).
Third, testing these relationships at the individual fore-
cast level, we find that forecasters agree broadly regarding
the direction of revision when they update their infor-
mation sets using the news from financial asset prices.
Most individual forecasters (more than 90%) revise their
forecasts downward as the daily credit spread increases;
however, there is substantial degree of cross-sectional
variability in the individual estimates, indicating that dif-
ferent forecasters interpret credit spread information dif-
ferently.
Fourth, we provide evidence as to whether forecast-
ers exhibit state-dependent forecasting behaviours when
they revise their GDP predictions in light of new infor-
mation from financial asset prices. Proxying the state
of the economy using a real-time daily measurement of
business conditions built by Aruoba, Diebold, and Scotti
(2009), we find that the effect of credit spreads on re-
visions of output growth forecasts is more prominent
during bad economic states. This result is consistent with
the findings both that information acquisition is faster
during recessions (Loungani et al., 2013), and that credit
shocks have larger effects on the output during peri-
ods of weak economic growth (Barnichon, Matthes, &
Ziegenbein, 2017).
The rest of the paper is organised as follows: Section 2
explains the structures of Economic Consensus and the
other data. Section 3 explains the MIDAS methodology for
analysing mixed-frequency data. Section 4 discusses the
empirical findings regarding the effects of credit spreads
on forecast revisions. Finally, Section 5 concludes.
2. Data
2.1. Consensus Economics
We examine the effect of credit spreads on GDP fore-
cast revisions using the Consensus Economics data set. Ev-
ery month, Consensus Economics Inc. publishes macroe-
conomic forecasts provided by a panel of professional
forecasters, comprising financial institutions, research
Please cite this article as: B. Deschamps, C. Ioannidis and K. Ka, High-frequency credit spread information and macroeconomic forecast revision. Interna-
tional Journal of Forecasting (2019), https://doi.org/10.1016/j.ijforecast.2019.04.023.
3
centres and large industrial firms. We use the fixed-event
GDP forecasts for the United States between 1991 and
2016. Every month, the panellists predict GDP for both
the current and the following year, i.e., each forecaster
makes their initial forecast for a given target year on Jan-
uary of the previous year and then updates that forecast
monthly, making a total of 24 forecasts for the target
year. This fixed-event structure of the survey gives a
three-dimensional panel structure (formalised by Davies
& Lahiri, 1995), comprising 26 target years, 24 forecast
horizons, and N forecasters. As characterised by Capistrán
and Timmermann (2009), forecasters frequently enter,
exit, and reenter after a period of absence. The average
number of forecasts submitted in each survey is 26.0 for
both the current and the following year, which gives us a
total of 16,213 observations.6
When measuring revisions, we count only the dif-
ferences between consecutive revisions, considering sub-
mitted but unchanged forecasts as zero revisions.7 We
prevent the inclusion of non-consecutive forecast values
in the calculation of consensus revisions by first calcu-
lating individual revisions, then averaging the revisions
across the individual forecasts.8 Each target year has 24
forecasts, and thus a maximum of 23 revisions.
Fig. 1 illustrates the means and standard deviations
of forecast revisions across horizons (h = 23, 22, . . . , 1).
The first row (‘All States’) shows that forecast revisions
tend to be negative at long horizons, as the GDP forecasts
begin with somewhat optimistic numbers that are gradu-
ally corrected and revised down as the horizon shortens.
The average standard deviation of revisions among fore-
casters is highest at middle horizons, when the forecasts
are being revised actively. Forecasts at shorter horizons
are revised less frequently, resulting in lower standard
deviations of revisions among forecasters. It can also be
seen from the bottom row that forecasts in bad states
overpredict the GDP at all horizons.
When matching the monthly revisions with daily credit
spread data, we take forecast revisions from the 7th to
18th updates, when we expect the relationship between
output forecasts and credit spread information should be
most relevant.9 Dovern et al. (2015) find that the average
revision size is larger at mid-horizons than at very long
6 See Figure A1 in the online appendix for the participation of the
survey panellists for forecasting GDP growth.
7 It is possible that forecasters may not respond if their predictions
remain unchanged. Dovern and Weisser (2011) interpolated the data
when an observation is missing but two adjacent forecasts are the
same by setting the missing value to the adjacent values. We tried
increasing the number of observations using the interpolation method
and confirmed that it does not affect our main findings.
8 Several studies (such as those by Deschamps & Ioannidis, 2013,
and Dovern & Weisser, 2011) prevent small sample problems by
excluding panellists who made too few forecasts, as occasional par-
ticipation may produce outliers in forecasts. Since we consider only
the revisions rather than the values of forecasts, we include all of
the forecasters when calculating consensus forecasts, regardless of the
forecasters’ participation rates. However, the results are robust even
when we exclude panellists with only small numbers of forecasts.
9 However, testing the relationships with different sets of forecast
horizons, such as the first 12 or the last 12 revisions, gives qualitatively
the same results (the results are available on request).
4 B. Deschamps, C. Ioannidis and K. Ka / International Journal of Forecasting xxx (xxxx) xxx

Fig. 1. Means and standard deviations of revisions. Notes: The figure illustrates the means and standard deviations of individual forecast revisions
across revision horizons (h = 23, 22, . . . , 1). The first row (all states) reports the statistics for the entire sample, whereas the bottom two rows
report the split sample statistics for good and bad states separately. Economic states are identified by averaging the daily Aruoba-Diebold-Scotti
(ADS) index values matched to monthly survey cycles. The sample period is from January 1991 to December 2016.

or short forecast horizons. Sheng and Wallen (2014) also
document that the professional forecasters included in the
Consensus Forecasts data set revise their medium-term
forecasts (10 to 17 months ahead) most frequently.10
2.2. Credit spreads
Credit spreads (also called quality spreads or default
spreads) are the differences between the interest rates
on matched maturity debt with different default risks.
The predictive content of credit spreads has been ex-
amined in a number of articles, with a focus on the US
economy, where the private debt market is most active.
For example, Bernanke (1983) documents the usefulness
of the Baa-Treasury bond spread as a predictor of in-
dustrial production growth during the Great Depression,
while Guha and Hiris (2002) show that the same spread
10 Sheng and Wallen (2014) explain that forecasters’ inattentiveness
at very long and short forecasting horizons is due to noisier signals
and the observation of actual outcomes, respectively.
contains useful information about the turning points of
business cycles. The spread between commercial paper
and Treasury bills (paper-bill spread) has also been shown
to be a significant predictor of real growth (see for exam-
ple Bordo & Haubrich, 2004; Emery, 1996; Ewing, Lynch,
& Payne, 2003; Friedman & Kuttner, 1993; Stock & Wat-
son, 1989), and Gertler and Lown (1999) demonstrate
that the high-yield spread outperforms other financial
indicators.11
We obtain daily observations of interest rates and
credit spreads from the Federal Reserve Economic Data
(FRED). The credit spread is calculated as the difference
between Moody’s Seasoned Aaa Corporate Bond and the
10-year Treasury constant maturity rate. Using the pre-
liminary MIDAS regression exercises based on different
measures of credit spreads from the literature, we choose
11 Unlike corporate–Treasury spreads, the spreads across corporate
bond categories (such as High yield–Aaa and Baa–Aaa) are related
mostly to default risk premia, and thus their relationship with the
business cycle is stronger during recessions (Duca, 1999).

Please cite this article as: B. Deschamps, C. Ioannidis and K. Ka, High-frequency credit spread information and macroeconomic forecast revision. Interna-
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 B. Deschamps, C. Ioannidis and K. Ka / International Journal of Forecasting xxx (xxxx) xxx
the spread between Aaa-rated corporate bonds and 10-
year Treasury notes (Aaa-spread) as our main high-
frequency financial variable, as it has exhibited the most
significant effects on forecast revisions. The Aaa-spread
has fluctuated markedly, widening notably around the
early 2000s recession and the recent Great Recession (see
Figure A2 in the online appendix).
The predictive power of the Aaa-spread has been tested
in several recent studies (see Buchmann, 2011; Gilchrist
et al., 2009; Mody & Taylor, 2004; Mueller, 2009; Schu-
macher, 2014). Specifically, Gilchrist et al. (2009) find
that the forecasting ability of bond spreads is associated
closely with information about the bonds of intermediate-
risk firms rather than those of high-risk firms.12
2.3. Other variables
The identification of economic states is required in
order to test differences in the ways in which forecasters’
expectations are formed as they incorporate financial in-
formation in different economic conditions. The literature
analysing the state dependence of forecasting behaviour
(for example Dovern, Fritsche, & Slacalek, 2012; Loun-
gani et al., 2013; Messina et al., 2015; Sinclair et al.,
2010; Sinclair, Stekler, & Carnow, 2015) generally uses
recessions that are identified ex-post by institutions such
as the National Bureau of Economic Research (NBER) or
the Economic Cycle Research Institute (ECRI). A notable
exception is the study by Dovern and Jannsen (2017),
which identifies recession years at an annual frequency
using the most recent data vintage.
Examining state-dependent forecasting behaviours
based on an ex-post measure of business conditions may
be problematic, as forecasters do not know the state of
the economy at the time when they are making their
forecasts.13 Thus, instead of using ex-ante defined reces-
sions, we adopt a real-time measure of aggregate business
conditions that was developed by Aruoba et al. (2009,
ADS index hereafter). The ADS index is an indicator that
track business conditions using a set of macroeconomic
and financial variables. It is constructed using a dynamic
factor model that permits the extraction of the latent state
of macroeconomic activity. Positive values of the ADS
index indicate better-than-average conditions, whereas
negative values indicate worse-than-average conditions;
the average value is zero. The index is updated by the
Federal Reserve Bank of Philadelphia and has proven to be
a useful indicator of economic conditions in real time.14
We assume that forecasters decide the current eco-
nomic state using all of the available real-time infor-
mation that is summarised in the ADS index. Then, the
12 We are able to replicate the finding in the literature that the credit
spread predicts GDP growth up to 12 quarters ahead for our sample
period 1991–2016. The results are available upon request.
13 In regard to determining the recessionary periods, matching ex-
post identified recession months between the actual survey date or the
target year is also questionable.
14 The index can be accessed online at https://www.philadelphiafed.
org/research-and-data/real-time-center/business-conditions-index.
The indicators that are used to construct the ADS index include
personal income, industrial production, jobless claims, payroll
employment, manufacturing and trade sales, and GDP.
Please cite this article as: B. Deschamps, C. Ioannidis and K. Ka, High-frequency credit spread information and macroeconomic forecast revision. Interna-
tional Journal of Forecasting (2019), https://doi.org/10.1016/j.ijforecast.2019.04.023.
5
economic states that are perceived by the forecasters at
the time of each survey are measured by the average
values of the daily ADS index between the previous and
current survey deadlines. The real-time economic activity
measure matched to the monthly survey cycle is illus-
trated in Figure A3 in the online appendix. This method
makes for a more transparent and straightforward rule
which might be close to agents’ recognition of the eco-
nomic conditions, using a broad information set in real
time.
3. MIDAS regressions
The MIDAS regression approach involves using data
sampled at different frequencies. By applying parsimo-
nious but flexible distributed lag polynomials, the MIDAS
framework allows us to use the information in high-
frequency explanatory variables, thus avoiding probable
issues from an a priori data aggregation scheme.15 The ba-
sic MIDAS model that we use to predict forecast revisions
is given by
REVt +1,τ = α+β ΣkK=1 b(k; θ )CSt −k/m +ρ REVt ,τ +εt +1,τ , (1)
where REVt ,τ denotes a consensus forecast revision for
US GDP growth rates for target year τ at time t. Con-
sensus forecast revisions are calculated as the average of
individual forecast revisions such that
n
REVt +1,τ = (1/nt )Σi t REVi,t +1,τ , (2)
where nt is the number of survey respondents at time t. K
denotes the number of lagged high-frequency explanatory
variables, and m is the number of trading days in a month.
Individual forecast revisions are the differences be-
tween two consecutive GDP growth forecasts from indi-
vidual i for target year τ at time t. Specifically,
REVi,t +1,τ = Fi,t +1,τ − Fi,t ,τ , (3)
where Fi,t ,τ is individual i’s forecast of the GDP growth
rate.16 CSt is the daily change in credit spreads. Our model
specification is in the class of ADL-MIDAS regressions,
introduced by Andreou et al. (2013), which offers the
structure of augmented distributed lag regression with
mixed-frequency data. The inclusion of an autoregres-
sive term of order one comes from the literature testing
the weak form of forecasting efficiency (Deschamps &
Ioannidis, 2013; Dovern et al., 2015; Nordhaus, 1987).
Several previous studies have proposed diverse func-
tional forms of MIDAS polynomial weights with the aim
of achieving parsimonious but flexible specifications.17
This study employs four weighting schemes for testing the
robustness of the relationships across different methods.
The first weighting scheme that we consider (denoted
M1) is the normalised beta probability density function
15 For an overview of the MIDAS regression framework, see Armesto,
Engemann, Owyang, et al. (2010), Andreou, Ghysels, Kourtellos, et al.
(2011), and Foroni and Marcellino (2013).
16 Notations for the revision horizons (h) are abstracted, as each
forecast time (t) matches one corresponding consensus revision.
17 Ghysels et al. (2007) present a discussion of various lag structures
for parametrising MIDAS weighting functions.
6 B. Deschamps, C. Ioannidis and K. Ka / International Journal of Forecasting xxx (xxxx) xxx
suggested by Ghysels et al. (2004, 2007). Specifically, we
use
θ −1
xk1 (1 − xk )θ2 −1
b(k; θ1 , θ2 ) = θ1 −1
, (4)
ΣkK=1 xk (1 − xk )θ2 −1
where xk = k/(K + 1). In M1, the parameters are esti-
mated using non-linear least squares. Our second weight-
ing scheme (M2) uses an Almon lag polynomial of order
P, specified as
β b(k; θ0 , . . . , θP ) = ΣpP=0 θp kp . (5)
In M2, the parameters are estimated by non-linear
least squares, and we set P = 2. We also use two al-
ternative polynomial specifications, step-weighting (M3)
and U-MIDAS (M4), that are estimated using OLS. The
step-function allocates different coefficients to several in-
tervals of high-frequency data as follows:
β b(k; θ1 , . . . , θP ) = θ1 Ik∈[a0 , a1 ] + ΣpP=2 θp Ik∈(ap−1 , ap ] , (6)
where P is the number of steps, and a0 = 1 < a1 < · · · <
aP = K . Ik is an indicator which becomes one when k
belongs to its corresponding interval and zero otherwise.
We set the number of steps in M3 to four, correspond-
ing to the number of weeks in one month. Meanwhile,
unrestricted MIDAS polynomials (U-MIDAS) use a sim-
ple regression for estimating the individual coefficients
without any constraints.18
4. Empirical results
4.1. Credit spread and growth forecasts revisions
As was discussed in the first section, studies have
shown that higher credit spreads are associated with GDP
growth. We estimate the four MIDAS regressions intro-
duced in the previous section in order to investigate the
relationship between credit spreads and forecast revi-
sions. Our sample begins with the first forecast revision in
1991M01 for the growth rate of 1991 and ends with the
revision in 2016M06 for the growth rate of 2016, making a
total of 306 revisions. There are 6505 Aaa-spread observa-
tions over 26 years, giving an average of 20.8 observations
for each month. Both the number of trading days per
month (m) and the number of lagged daily series (K ) in
Eq. (1) are set to 20. Most submission deadlines are the
second Monday of the month, so 20 daily observations of
credit spreads before the survey deadlines is selected to
match each forecast revision.19
As deteriorations in credit conditions work to prop-
agate and amplify the effects of macroeconomic shocks
and to depress economic activity (Bernanke, Gertler, &
18 U-MIDAS is particularly useful when m (the number of high-
frequency data points linked to one low-frequency observation)
is small, especially in the case of regressing quarterly series on
monthly (Foroni, Marcellino, & Schumacher, 2015). However, we es-
timate a U-MIDAS model in order to confirm whether we can find a
specific daily lag formation as the forecasters use financial information.
19 An exercise with a larger number of lagged daily spreads, for
example 40 lags, gives similar results, showing that added lags do not
affect the revisions significantly.
Please cite this article as: B. Deschamps, C. Ioannidis and K. Ka, High-frequency credit spread information and macroeconomic forecast revision. Interna-
tional Journal of Forecasting (2019), https://doi.org/10.1016/j.ijforecast.2019.04.023.
Gilchrist, 1999), we anticipated that the survey respon-
dents would make negative (positive) growth forecast
revisions when credit spreads increased (decreased). Fur-
thermore, we expected no clear patterns in MIDAS weight-
ing polynomials on daily information, as there is no rea-
son for credit spreads on specific days in a month to
react to future economic growth more strongly. A fore-
caster who is efficient at incorporating information from
high-frequency asset prices may use every available ob-
servation, whether one day old or twenty. In other words,
we would expect MIDAS weights to be equally negative
for all days. Evidence that the weights are larger for
specific days would indicate that forecasts respond more
strongly to information that is released on those days.
Fig. 2 plots the estimated MIDAS polynomials for the
four different weighting schemes across the 20 daily lags
of credit spreads. The estimated parameters for M1 and
M2 are reported in Table 1. In all four models, the con-
sensus GDP growth forecasts are revised negatively when
credit spreads increase.20 The significance of the relation-
ship for M1 and M2 can be seen from the t-statistics in Ta-
ble 1. For M3, the confidence interval in Fig. 2 shows sig-
nificance for all steps, while the coefficient estimates of U-
MIDAS (M4) are all negative but not always significant.21
Overall, our findings are largely consistent with the pre-
diction that GDP forecasts incorporate credit spread infor-
mation. Table 1 also reports the results for a model with
only lagged revisions (M0). The estimates for ρ are around
0.5 in all specifications, showing the existence of sub-
stantial information rigidities in consensus forecasts.22
In Table 1, the MIDAS estimations including daily credit
spreads give substantially higher adjusted R2 values, im-
plying that forecasters update their growth predictions in
line with developments in credit conditions.23
Interestingly, we find that the weighting functions are
not flat, as the polynomials in Fig. 2 are clearly hump-
shaped. The largest effects are concentrated between 10
and 15 days, though there is some variability across mod-
els. The common pattern of the four weighting functions
20 For M1 and M2, we first set the order of polynomials that is
usually selected in the literature and use non-linear least squares to
estimate the parameters. Regarding the step-weighting scheme, the
number of steps (P) is set to four, which corresponds approximately to
the number of weeks in a month, and the coefficients associated with
each p are then estimated using OLS.
21 We find that the residuals for all four specifications are i.i.d. (no
autocorrelation and no ARCH effects). We test the squared residuals for
unknown structural breaks using the Quandt-Andrews test and find no
structural breaks; however, normality is rejected. Diagnostic test results
are reported in Table A1 of the online appendix.
22 Our estimate of the rigidity parameter (ρ ) is larger than those
from previous studies with different sample periods. For example, Ager,
Kappler, and Osterloh’s (2009) estimated rigidity coefficient is 0.28
based on data from 1996 to 2006, while Dovern et al. (2015) report a
coefficient of 0.33 using a sample from 1989 to 2010.
23 We confirm the robust relationships between credit spreads and
forecast revisions by also performing an out-of-sample exercise. Specif-
ically, we use the data between 1990 and 2010 as an in-sample
period and test whether the MIDAS models with daily credit spreads
outperform our benchmark with AR(1). We find that the mean squared
forecast errors (MSFEs) of MIDAS models are smaller than those that
we get from the benchmark in most cases. These results are available
upon request.
 B. Deschamps, C. Ioannidis and K. Ka / International Journal of Forecasting xxx (xxxx) xxx 7

Fig. 2. Estimated MIDAS polynomials. Notes: The figure plots the estimated MIDAS polynomials from Eq. (1) for the four weighting functions. The
estimations are based on a normalised beta probability density function (M1), Almon lag polynomials (M2), a step-weighting function (M3), and
U-MIDAS (M4). The dashed lines in M3 and M4 indicate two standard errors from the estimates.

Table 1 forecasters incorporate credit spread information, they

Parameter estimates for MIDAS regressions. do not incorporate all credit spread information received
α β θ1 θ2 ρ R2 equally.
M1 −0.007 −9.948 3.026 1.824 0.503 0.392 The hump shape of these polynomials is indicative of
(−0.660) (−6.505) (2.363) (3.673) (11.173) information rigidities (see for example Coibion & Gorod-
α θ0 θ1 θ2 ρ R2 nichenko, 2012, 2015a), in the sense that forecasts are
M2 −0.009 0.288 −0.192 0.008 0.507 0.377 updated on the basis of 10- to 15-day-old information and
(−0.833) (1.042) (−3.308) (3.232) (11.095) are less responsive to the most recent information. Fur-
α ρ R2 thermore, hump-shaped polynomials are consistent with
M0 −0.008 0.516 0.261 models of sticky information (Coibion & Gorodnichenko,
(−0.781) (7.960) 2015a; Mankiw & Reis, 2002). In sticky information mod-
Notes: The table reports the Eq. (1) coefficient estimates in a MIDAS els, forecasters update their information sets infrequently,
regression of the revisions of consensus GDP growth rates on a lag and a fraction of the forecasts in any given period are
of revisions and changes in credit spreads (the difference between based on outdated information. The finding that the con-
Aaa-rated corporate bond and 10-year Treasury rates). The estimations
sensus forecast places little weight on the most recent
are based on a normalised beta probability density function (M1)
and Almon lag polynomials (M2). M0 is a model without daily credit information suggests that some forecasters do not use the
spreads. α is a constant, β is a slope coefficient in model M1 of the latest information. Consensus forecasts incorporate the
high-frequency (daily) Aaa-spread, and ρ is a coefficient of the lag of most recent information only partially, which contributes
revisions. The θ s are the parameters that determine the shape of the
to the formation of information rigidities in consensus
weighting polynomials on the daily credit spreads, and are estimated
using non-linear least squares. The adjusted R2 is shown in the last forecasts.
column. See Eqs. (1), (4), and (5) for further details. The values in Overall, our analysis suggests that the well-
parentheses are t-statistics. The sample period is from 1991 to 2016. documented information rigidities in consensus forecasts
can be attributed in part to the slow incorporation of
high-frequency financial information.
shows that consensus forecast revisions are more closely
associated with daily information lagged by around two 4.2. Economic state and forecast revisions
weeks prior to the submission deadlines than with the
latest information.24 This result indicates that, although Several recent studies have proposed theoretical ex-
planations for the sluggishness in survey forecasts, in-
cluding information frictions (Coibion & Gorodnichenko,
24 The survey deadlines do not necessarily match either the dates
on which the surveys are actually submitted or the dates on which
the respondents form their predictions. However, we believe that their predictions on dates close enough to observe the most up-to-date
professionals who make consecutive monthly predictions may form information.

Please cite this article as: B. Deschamps, C. Ioannidis and K. Ka, High-frequency credit spread information and macroeconomic forecast revision. Interna-
tional Journal of Forecasting (2019), https://doi.org/10.1016/j.ijforecast.2019.04.023.
8 B. Deschamps, C. Ioannidis and K. Ka / International Journal of Forecasting xxx (xxxx) xxx
2012), heterogeneity in loss aversion (Capistrán & Tim-
mermann, 2009), and forecasters’ rational maximisation
of their perceived abilities (Deschamps & Ioannidis, 2013).
In fact, the origins of the forecast smoothness in these
models, such as the variations in information rigidity and
the role of revisions in determining perceived ability,
should be related closely to economic conditions. For
example, in periods of high volatility, forecasters may
confront larger costs of ignoring new information, as well
as smaller losses of reputation associated with devia-
tions from their previous forecasts. Indeed, Ribeiro and
Veronesi (2002) find that agents’ expectations are influ-
enced more by current innovations in a recessionary state
when their uncertainty about the current regime is high.
Following the recent literature studying state-
dependent expectations formation in forecasting
behaviour, we examine whether forecasters’ responses
to high- frequency information in asset prices differ ac-
cording to the economic state. Specifically, our model
modifying Eq. (1) is
REVt +1,τ = [α0 + β0 ΣkK=1 b(k; θ 0 )CSt −k/m + ρ0 REVt ,τ ]
× (1 − ŝt +1 )
+ [α1 + β1 ΣkK=1 b(k; θ 1 )CSt −k/m + ρ1 REVt ,τ ]
× ŝt +1 + εt +1,τ ,
(7)
where ŝt +1 is a dummy variable that is associated with the
ADS index for determining economic states between t and
t + 1. The value of ŝt +1 is zero when the averaged ADS
index is equal to or above a certain threshold, and one
otherwise. We set this threshold so that the months with
the lowest one-third of averaged ADS index values are
identified as bad states. When determining the threshold,
we keep in mind the fact that economic expansions are
usually longer than contractions. The identified bad states
(bottom one-third) include all of the months that are
defined as recessions by the NBER, but also cover more
times of economic slowdown due to smaller business
cycles (see Figure A3 in the online appendix).25
This modified version of the model allows both fore-
cast smoothing and the effect of the credit spread to be
state-dependent. A recent line of research focuses on the
non-linear effects of credit shocks, and Barnichon et al.
(2017), for instance, find that credit shocks have a larger
impact on economic activity during low-growth periods.
We investigate whether such non-linearities also apply to
forecast data by allowing for state-dependent effects. If
the effect of the credit spread on GDP growth is larger in
bad states than in good states, we would expect profes-
sional forecasters to incorporate this relationship in their
forecasts.
25 The results of our exercises do not change qualitatively when we
adjust the threshold or use alternative definitions such as the NBER’s
business cycle dates. We also confirm that the performance of our
model is not driven by the strong relationship in specific periods. For
example, excluding the Great Recession period (December 2007–June
2009), when credit spreads increased rapidly with a significant fall in
GDP growth, does not affect our conclusion. The results are available
upon request.
Please cite this article as: B. Deschamps, C. Ioannidis and K. Ka, High-frequency credit spread information and macroeconomic forecast revision. Interna-
tional Journal of Forecasting (2019), https://doi.org/10.1016/j.ijforecast.2019.04.023.
Fig. 1 illustrates the means and standard deviations
of individual forecast revisions across revision horizons,
calculated for both good and bad states. The plots in the
first column show that forecasters made large positive
errors in bad states, implying that they made moderate
forecast values initially without much knowledge of the
future state. Revisions in bad states peak between the
7th and 12th revisions, which is earlier than revisions in
good states, which tend to be made between 10 and 16
months after the initial forecasts. The standard deviations
of the revisions are larger in bad states, suggesting that
forecasters disagree more regarding the revising of GDP
forecasts under such economic conditions.
Fig. 3 plots the estimated MIDAS weights using the
four models. The effects of daily credit spreads on monthly
consensus forecast revisions are negative in both states,
but the relationships are notably stronger in bad states.
Comparing the slope coefficients on credit spreads in
the M1 specification, Table 2 reports that βˆ1 is larger
in absolute value than βˆ0 . The coefficients of M3 and
M4 show that growth forecast revisions are more promi-
nent in bad economic states, and forecasters incorporate
more recent information associated with the variations
in credit spreads. These results are consistent with the
findings of Loungani et al. (2013) that the acquisition of
information is faster during recessions. Gorodnichenko
(2008) has also shown that macroeconomic shocks lower
agents’ inattention, as information rigidity is endogenous
to economic states. The adjusted R2 values in bad states
are 0.45 (M1) and 0.43 (M2), which are higher than those
from the regressions with only lagged revisions (0.18),
indicating that regressing revisions on the credit spread
increases the model goodness-of-fit substantially in bad
states.26
4.3. Forecast revisions at the individual level
Next, we test whether the effect of credit spreads on
GDP forecast revisions that has been found at the con-
sensus forecast level exists for individual forecasts. The
individual MIDAS regression model that is analogous to
Eq. (1) is
REVi,t +1,τ = αi + βi ΣkK=1 b(k; θ i )CSt −k/m + ρi REVi,t ,τ
+ εi,t +1,τ , (8)
where REVi,t ,τ is the forecast revision of forecaster i for
target year τ at time t. Eq. (8) has five parameters requir-
ing estimation for each individual forecaster in the case of
M1. We only test with forecasters who made more than
50 revisions in total, which left 41 forecasters with an
average of 148.9 revisions each.
We report the results of the individual-level estimation
using model M1, as it provides the slope estimates (β̂i )
that are related to the sign and size of the forecast updates
associated with the development of the credit spread. The
estimated coefficients on the daily credit spread (βi ) are
26 It should be noted that the results are not driven by the large
credit spread changes that took place during the Great Recession: we
also estimate a specification that excludes the Great Recession period
and the results remain essentially unchanged.
 B. Deschamps, C. Ioannidis and K. Ka / International Journal of Forecasting xxx (xxxx) xxx 9

Fig. 3. Estimated MIDAS polynomials between good and bad economic states. Notes: The figure plots the estimated MIDAS polynomials from Eq.
(7) for the four weighting functions in good and bad economic states. Economic states are identified by averaging the daily Aruoba-Diebold-Scotti
(ADS) index values matched to monthly survey cycles. The estimates are based on a normalised beta probability density function (M1), Almon
lag polynomials (M2), a step-weighting function (M3), and U-MIDAS (M4). The dashed lines in M3 and M4 indicate two standard errors from the
estimates.

negative for 36 individuals out of 41 (87.8%). Counting
only the coefficient that was estimated to be significant at
the 10% level, we find that 28 individuals out of 30 (93.3%)
responded negatively to the change in the Aaa-spread.
The first row in Fig. 4 plots the histogram of the estimated
coefficients (β̂i ), showing that the estimates conform to
the normal distribution, with an average value of −10.3,
which is close to the value (−9.9) from the coefficient of
consensus revisions (β̂ ).

Please cite this article as: B. Deschamps, C. Ioannidis and K. Ka, High-frequency credit spread information and macroeconomic forecast revision. Interna-
tional Journal of Forecasting (2019), https://doi.org/10.1016/j.ijforecast.2019.04.023.
10 B. Deschamps, C. Ioannidis and K. Ka / International Journal of Forecasting xxx (xxxx) xxx

Fig. 4. Distributions of MIDAS coefficients at the individual level. Notes: The figure plots histograms of the slope coefficients (β̂i ) on credit spreads
and on lagged forecast revisions (ρ̂i ) from Eqs. (8) and (9). The estimates are based on MIDAS regression M1 (using a normalised beta probability
density function). The first row reports the results for all states, whereas the second and third rows report the results for good and bad states
respectively. Forecasters with fewer than 50 revisions are excluded, leaving a total of 41 forecasters.

This exercise shows that individual forecasters revise
their forecasts systematically according to high-frequency
information in asset markets, and mostly agree on the
sign of the impact of the developments in credit con-
ditions. However, the range of the estimates displayed
in Fig. 4 shows that forecasters disagree on the possible
magnitudes of the effects, which is consistent with the
hypothesis that forecasters interpret public information
differently (Lahiri & Sheng, 2010; Manzan, 2011).
The average estimate of the individual forecast rigidity
(ρ̂i ) is 0.14, and 37 out of 41 individual estimates are
positive. The finding that forecast revisions are autocor-
related is strong evidence of forecast smoothing at the
individual level. Individual forecasts are inefficient and
therefore not optimal. On average, the rigidity measure is
much lower (0.14) than the estimate of consensus forecast
revisions (around 0.5). This result is consistent with the
findings of previous studies that information rigidity in
forecast surveys is a property that is related largely to
the consensus forecast level, not being as strong at an
individual level (Coibion & Gorodnichenko, 2015a; Dovern
et al., 2015). Although forecasts are revised according to

Please cite this article as: B. Deschamps, C. Ioannidis and K. Ka, High-frequency credit spread information and macroeconomic forecast revision. Interna-
tional Journal of Forecasting (2019), https://doi.org/10.1016/j.ijforecast.2019.04.023.
 B. Deschamps, C. Ioannidis and K. Ka / International Journal of Forecasting xxx (xxxx) xxx 11

Table 2 The second and third rows of Fig. 4 display the his-
Parameter estimates for MIDAS regressions in good and bad economic tograms of the estimates of βi and ρi in good and bad
states.
economic states. A majority of forecasters revise their out-
Panel A. Good states
put forecasts downward when credit spreads increase but
α0 β0 θ0,1 θ0,2 ρ0 R2 exhibit substantial rigidities in updating their forecasts,
M1 0.020 −6.028 1.795 1.025 0.461 0.268 as is shown by the positive values of ρ̂i . The estimates
(1.950) (−3.635) (2.242) (24.491) (7.783)
of both coefficients are more dispersed in bad states,
α0 θ0,0 θ0,1 θ0,2 ρ0 R2 showing that forecasters disagree more in response to
M2 0.020 −0.319 0.018 −0.001 0.469 0.270 high-frequency financial information in bad states than
(1.945) (−1.002) (0.265) (−0.441) (7.887) in good states, when they show more concentrated dis-
α0 ρ0 R2 tributions. This result suggests that the information from
M0 0.018 0.473 0.228 market forecasters is more dispersed in troubled times,
(1.685) (6.903) meaning that policy makers such as monetary authorities
Panel B. Bad states should pay more attention to the signals from financial
α1 β1 θ1,1 θ1,2 ρ1 R2 markets.
M1 −0.054 −13.530 3.432 2.186 0.472 0.446
As this exercise has shown, the extent to which fore-
(−2.430) (−5.245) (2.170) (3.257) (6.244) casters incorporate high-frequency credit spread infor-
α1 θ1,0 θ1,1 θ1,2 ρ1 R2 mation varies substantially. We investigate a possible
link between individuals’ use of financial information
M2 −0.060 0.952 −0.403 0.018 0.492 0.430
(−2.602) (2.004) (−4.041) (4.027) (6.296) when making revisions and their forecasting abilities by
initiating a simple regression that connects the individ-
α1 ρ1 R2
ual forecasters’ abilities with the degree of responses to
M0 −0.074 0.442 0.175
(−2.169) (4.342)
daily credit spreads. Individuals’ forecasting abilities are
measured using root mean squared forecast errors (De-
Notes: The table reports the Eq. (7) coefficient estimates in a MIDAS
schamps & Ioannidis, 2013) over the entire period (1991–
regression of the revisions of consensus GDP growth rates on a lag
of revisions and changes in credit spreads (the difference between 2016), defined as
Aaa-rated corporate bond and 10-year Treasury rates). The estimations 1/2
are based on a normalised beta probability density function (M1)
RMSEi = [(1/(26 × 24))Στ2016
=1991 Σh=1 ei,τ ,h ]
24 2
, (10)
and Almon lag polynomials (M2). M0 is a model without daily credit
spreads. α is a constant, β is a slope coefficient in M1 of the high- where e2i,τ ,h is the squared forecast error for forecast i.28
frequency (daily) Aaa-spread, and ρ is a coefficient of the lag of The forecast errors are calculated using the initial GDP
revisions. The θ s are the parameters that determine the shape of the releases rather than the revised GDP data, as is standard
weighting polynomials on the daily credit spreads, and are estimated in the literature (Chen, Costantini, & Deschamps, 2016;
using non-linear least squares. See Eqs. (4), (5), and (7) for further
details. The adjusted R2 is shown in the last column. The values in
Dovern & Weisser, 2011; El-Shagi et al., 2016).29
parentheses are t-statistics. The sample period is from 1991 to 2016. We investigate whether forecasters who strongly in-
corporate credit spread information show higher overall
forecast abilities. Specifically, we estimate the relation-
credit spread information, there are still inefficiencies in ship between individual RMSEs and estimated slope co-
the ways in which forecasters use the information, as they efficients on the daily credit spread (β̂i ) using the simple
do not react fully to the latest developments in financial regression:
asset prices.27 RMSEi = δ0 + δ1 β̂i + ηi . (11)
We further examine how the forecast updating be-
haviours of individual forecasters vary depending on the Fig. 5 plots the relationship between the two variables.
economic state. Our model adjusting Eq. (8) is As RMSE increases with higher average forecast errors,
a lower RMSE indicates a higher ability. The coefficients
REVi,t +1,τ =[αi,0 + βi,0 ΣkK=1 b(k; θ i,0 )CSt −k/m on credit spreads (β̂i ) are related positively to RMSEi , but
+ ρi,0 REVi,t ,τ ] × (1 − ŝt +1 ) the relationship is statistically significant only when the
(9) economy is in bad states. Table 3 reports the estimation
+ [αi,1 + βi,1 ΣkK=1 b(k; θ i,1 )CSt −k/m
results and confirms that δ̂1 is positive and significant in
+ ρi,1 REVi,t ,τ ] × ŝt +1 + εi,t +1,τ , bad states. This result implies that responding to the de-
where ŝt +1 is a dummy variable, classified based on the velopments in credit market conditions more actively and
ADS index, that defines economic states between t and consistently enables forecasters to make smaller forecast-
t + 1. ing errors on average; however, this relationship depends
mostly upon their strong responses during bad economic
states.
27 Studies such as that of Gallo et al. (2002) have shown that
the consensus of other forecasters in the previous period affects
28 Using mean squared errors (MSE) instead of root mean squared
individuals’ current predictions. Our study is not connected to that
issue directly, as we focus instead on forecast revisions. However, errors (RMSE) to measure forecasters’ abilities gives similar results.
our findings at the individual forecaster level do imply that revisions 29 The real-time macroeconomic data set of diverse vintages
that are in response to the signals from credit conditions make the is provided by the Federal Reserve Bank of Philadelphia at
forecasters’ herding less severe, as the majority of the forecasters revise https://www.philadelphiafed.org/research-and-data/real-time-
in the same direction. center/real-time-data.

Please cite this article as: B. Deschamps, C. Ioannidis and K. Ka, High-frequency credit spread information and macroeconomic forecast revision. Interna-
tional Journal of Forecasting (2019), https://doi.org/10.1016/j.ijforecast.2019.04.023.
12 B. Deschamps, C. Ioannidis and K. Ka / International Journal of Forecasting xxx (xxxx) xxx

Fig. 5. Individual MIDAS coefficients and forecasting abilities. Notes: The figure plots the linear relationship between the slope coefficients (β̂i ) on
credit spreads estimated using M1 and individuals’ forecasting abilities, measured by the root mean squared error (RMSE). Each circle corresponds
to one forecaster. Forecasters with fewer than 50 revisions are excluded, leaving a total of 41 forecasters. The first row is for all economic states,
while the second and third rows are for good and bad states respectively.

5. Conclusion The weighting functions of the four MIDAS regressions

This paper has explored the relationship between high-
frequency credit spread information and forecast revi-
sions. Using a MIDAS regression approach, we have pro-
vided empirical evidence that daily changes in credit
spreads have significant predictive ability for monthly
revisions of GDP growth forecasts. Specifically, we have
shown that increases in daily credit spreads, measured as
the difference between the long-term Aaa-rated corporate
bond rate and the constant maturity 10-year Treasury
rate, are associated with significant downward forecast
revisions both at the consensus and individual levels.
that we have examined have all indicated hump-shaped
polynomials, suggesting that forecasters do not respond
in a sufficient and timely manner for incorporating all
high-frequency information in financial markets. We test
how the effect differs between economic states and show
that the effects of credit spreads on GDP forecast revisions
are more prominent when the economy is in bad states,
which is consistent with the previous literature study-
ing state-dependent expectations formations in survey
forecasts.

Please cite this article as: B. Deschamps, C. Ioannidis and K. Ka, High-frequency credit spread information and macroeconomic forecast revision. Interna-
tional Journal of Forecasting (2019), https://doi.org/10.1016/j.ijforecast.2019.04.023.
 B. Deschamps, C. Ioannidis and K. Ka / International Journal of Forecasting xxx (xxxx) xxx
Table 3
Responses to the credit spread and forecasting abilities.
δ0 δ1 R2 N Review, 257–276.
All states 0.563 0.001 0.008 41
(37.298) (0.577)
Good states 0.557 0.000 0.000 41
(39.095) (0.110)
Bad states 0.571 0.002 0.109 41
(50.528) (2.186)
Notes: The table reports the Eq. (11) OLS estimates for testing the
relationship between the degree of responses to daily credit spreads
(β̂i in model M1) and individual forecasting abilities across economic
states. Individuals’ forecasting abilities are measured by the root mean
squared forecast errors. δ0 is a constant, and δ1 is the relationship
between forecasting ability and βi . N is the number of forecasters.
The values in parentheses are Newey–West t-statistics (Newey & West,
1987). The sample period is from 1991 to 2016.
Acknowledgments
This paper represents the authors’ personal opinions
and does not necessarily reflect the views of the Bank
of Korea. We are grateful to the editor, two reviewers,
and the seminar participants at the Bank of Korea and the
MMF 50th annual conference.
Appendix A. Supplementary data
Supplementary material related to this article can be
found online at https://doi.org/10.1016/j.ijforecast.2019.
04.023.
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Christos Ioannidis joined the Economics, Finance and Entrepreneur-
ship Group at Aston Business School as Professor of Entrepreneurial
Finance in 2016. He has previously held posts at the University of Bath,
Cardiff Business School, University of Liverpool and Brunel University.
His publications cover international transmission of economic shocks,
inflation, macroeconomic forecasting, financial and credit markets,
liquidity and models of asset price volatility and they have appeared
or are forthcoming in journals such as Journal of Econometrics, Journal
of Political Economy, Economics Letters, Journal of Futures Markets,
Journal of Forecasting, Omega, Journal of Financial and Quantitative
Analysis and others.
 B. Deschamps, C. Ioannidis and K. Ka / International Journal of Forecasting xxx (xxxx) xxx 15

Bruno Deschamps is Associate Professor at the Nottingham University
Business School China. Previously he worked at the University of Bath.
His research interests are in the fields of macroeconomic forecast-
ing, and applied microeconometrics. His primary research interest is
concentrated around the theme of the evaluation of macroeconomic
forecasts. In particular, he is working on efficiency tests for fixed-
events forecasts, and strategic forecasting. He is also working on and
the relationship between the macroeconomy and financial markets.
His work has appeared in journals such as the Journal of Economic
Behavior and Organization, the International Journal of Forecasting, and
the Review of International Economics.
Kook Ka is currently working as a research economist in the Bank
of Korea’s Economic Research Institute. He has a broad expertise in
macroeconomic forecasting, and his research interests are in the areas
of monetary economics, macro-finance, and macroeconomic forecast-
ing. He received his PhD in Economics from the University of Bath; he
also holds an MSc in Economics from the University of Warwick.

Please cite this article as: B. Deschamps, C. Ioannidis and K. Ka, High-frequency credit spread information and macroeconomic forecast revision. Interna-
tional Journal of Forecasting (2019), https://doi.org/10.1016/j.ijforecast.2019.04.023.