Too Good to be True? The (In)credibility of the UK Inflation Fan Charts
AbstractThis paper presents some simple methods to estimate the probability that realized inflation will breach a given inflation target range over a specified period, based on the Bank of England?s RPIX inflation forecasting model and the Monetary Policy Committee?s forecasts of the parameters on which this model is built. Illustrative results for plausible target ranges over the period up to 04Q1 indicate that these probabilities are low, if not very low, and strongly suggest that the Bank?s model over-estimates inflation risk.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Industrial Economics Division in its series Occasional Papers with number 11.
Date of creation: 09 2004
Date of revision: 11 Jan 2004
Contact details of provider:
Postal: Jubilee Campus, Wollaton Road, Nottingham, NG8 1BB
Phone: +44 (0) 115 84 66602
Fax: +44 (0) 115 84 66667
Web page: http://www.nottingham.ac.uk/business/Divisions/EconomicsFinance/
More information through EDIRC
Inflation; inflation risk; fan charts;
Find related papers by JEL classification:
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
- E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - 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-2004-12-12 (All new papers)
- NEP-ECM-2004-12-12 (Econometrics)
- NEP-MAC-2004-12-12 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Wallis, Kenneth F., 2001.
"Chi-squared tests of interval and density forecasts and the Bank of England's fan charts,"
Working Paper Series
0083, European Central Bank.
- Wallis, Kenneth F., 2003. "Chi-squared tests of interval and density forecasts, and the Bank of England's fan charts," International Journal of Forecasting, Elsevier, vol. 19(2), pages 165-175.
- Wallis, Kenneth F., 2002. "Chi-squared tests of interval and density forecasts, and the Bank of England's fan charts," Royal Economic Society Annual Conference 2002 181, Royal Economic Society.
- Nessen, Marianne & Vestin, David, 2005.
"Average Inflation Targeting,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 37(5), pages 837-63, October.
- Kenneth F. Wallis, 2004. "An Assessment of Bank of England and National Institute Inflation Forecast Uncertainties," National Institute Economic Review, National Institute of Economic and Social Research, vol. 189(1), pages 64-71, July.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Robert Hoffmann).
If references are entirely missing, you can add them using this form.