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Incorporating Judgement in Fan Charts

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  • Pär Österholm

Abstract

Within a decision‐making group, such as a central bank's monetary‐policy committee, group members often hold differing views about the future of key economic variables. Such differences of opinion can be thought of as reflecting differing sets of judgement. This paper suggests modelling each agent's judgement as one scenario in a macroeconomic model. Each judgement set has a specific dynamic impact on the system and, accordingly, a particular predictive density—or fan chart—associated with it. A weighted linear combination of the predictive densities yields a final predictive density that reflects the uncertainty perceived by the agents generating the forecast.

Suggested Citation

  • Pär Österholm, 2009. "Incorporating Judgement in Fan Charts," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(2), pages 387-415, June.
    • Handle: RePEc:bla:scandj:v:111:y:2009:i:2:p:387-415
    DOI: 10.1111/j.1467-9442.2009.01569.x
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    Cited by:

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    2. Ohlsson, Henry, 2007. "The legacy of the Swedish gift and inheritance tax, 1884–2004," Working Paper Series 2007:23, Uppsala University, Department of Economics.
    3. Sune Karlsson & Pär Österholm, 2023. "Is the US Phillips curve stable? Evidence from Bayesian vector autoregressions," Scandinavian Journal of Economics, Wiley Blackwell, vol. 125(1), pages 287-314, January.
    4. Österholm, Pär, 2012. "The limited usefulness of macroeconomic Bayesian VARs when estimating the probability of a US recession," Journal of Macroeconomics, Elsevier, vol. 34(1), pages 76-86.
    5. Gustafsson, Peter & Stockhammar, Pär & Österholm, Pär, 2016. "Macroeconomic effects of a decline in housing prices in Sweden," Journal of Policy Modeling, Elsevier, vol. 38(2), pages 242-255.
    6. P&aauml;r Österholm & Jeromin Zettelmeyer, 2008. "The Effect of External Conditions on Growth in Latin America," IMF Staff Papers, Palgrave Macmillan, vol. 55(4), pages 595-623, December.

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    More about this item

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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