Term Structure Of Inflation Forecast Uncertainties And Skew Normal Distributions
AbstractEmpirical evaluation of macroeconomic uncertainties and their use for probabilistic forecasting are investigated. A new weighted skew normal distribution which parameters are interpretable in relation to monetary policy outcomes and actions is proposed. This distribution is fitted to recursively obtained forecast errors of monthly and annual inflation for 38 countries. It is found that this distribution fits inflation forecasts errors better than the two-piece normal distribution, which is often used for inflation forecasting. The new type of ‘fan charts’ net of the epistemic (potentially predictable) element is proposed and applied for UK and Poland.
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Bibliographic InfoPaper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 14/01.
Date of creation: Jan 2014
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Find related papers by JEL classification:
- C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-02-08 (All new papers)
- NEP-CBA-2014-02-08 (Central Banking)
- NEP-ECM-2014-02-08 (Econometrics)
- NEP-FOR-2014-02-08 (Forecasting)
- NEP-MAC-2014-02-08 (Macroeconomics)
- NEP-MON-2014-02-08 (Monetary Economics)
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