This thesis explores historical inflation forecasts used in the Department of Defense (DoD) Future Years Defense Program. Recent General Accounting Office reports assert DoD inflation forecasts mandated by the Office of Management and Budget(OMB) are optimistic and exhibit a downward bias. This study tests this assertion by examining historical DoD forecasts against experienced inflation as measured by the Gross Domestic Product and Gross National Product implicit price deflator (GNP/GDP IPD) from 1979 to 1996. This study also compares the accuracy ofDoD forecasts with those made by the Congressional Budget Office (CBO) and Data Resources, Incorporated (DRI). The results regarding the performance of historical DoD inflation forecasts are mixed. Upon examining budget through five year GNP/GDP IPD forecast spans, DoD short-term results do not indicate a downward bias and DoD long-term results do indicate a slight downward bias.
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