On the uncertainty and risks of macroeconomic forecasts: Combining judgements with sample and model information
AbstractInstitutions which publish macroeconomic forecasts usually do not rely on a single econometric model to generate their forecasts. The combination of judgements with information from different models complicates the problem of characterizing the predictive density. This paper proposes a parametric approach to construct the joint and marginal densities of macroeconomic forecasting errors, combining judgements with sample and model information. We assume that the relevant variables are linear combinations of latent independent two-piece normal variables. The baseline point forecasts are interpreted as the mode of the joint distribution, which has the convenient feature of being invariant to judgments on the balance of risks.
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 Banco de Portugal, Economics and Research Department in its series Working Papers with number w200821.
Date of creation: 2008
Date of revision:
Other versions of this item:
- Maximiano Pinheiro & Paulo Esteves, 2012. "On the uncertainty and risks of macroeconomic forecasts: combining judgements with sample and model information," Empirical Economics, Springer, vol. 42(3), pages 639-665, June.
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
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.:
- 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.
- Calzolari, Giorgio & Panattoni, Lorenzo, 1988.
"Mode predictors in nonlinear systems with identities,"
28845, University Library of Munich, Germany.
- Calzolari, Giorgio & Panattoni, Lorenzo, 1990. "Mode predictors in nonlinear systems with identities," International Journal of Forecasting, Elsevier, vol. 6(3), pages 317-326, October.
- Álvaro A. Novo & Maximiano Pinheiro, 2003. "Uncertainty And Risk Analysis Of Macroeconomic Forecasts: Fan Charts Revisited," Working Papers w200319, Banco de Portugal, Economics and Research Department.
- Eric Leeper, 2003. "An "Inflation Reports" Report," NBER Working Papers 10089, National Bureau of Economic Research, Inc.
- Jose T.A.S. Ferreira & Mark F.J. Steel, 2004.
"Model Comparison of Coordinate-Free Multivariate Skewed Distributions with an Application to Stochastic Frontiers,"
- Ferreira, Jose T.A.S. & Steel, Mark F.J., 2007. "Model comparison of coordinate-free multivariate skewed distributions with an application to stochastic frontiers," Journal of Econometrics, Elsevier, vol. 137(2), pages 641-673, April.
- Fernández, C. & Steel, M.F.J., 1996. "On Bayesian Modelling of Fat Tails and Skewness," Discussion Paper 1996-58, Tilburg University, Center for Economic Research.
- Cogley, Timothy & Morozov, Sergei & Sargent, Thomas J., 2005.
"Bayesian fan charts for U.K. inflation: Forecasting and sources of uncertainty in an evolving monetary system,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 29(11), pages 1893-1925, November.
- Cogley, Timothy W. & Morozov, Sergei & Sargent, Thomas J., 2003. "Bayesian fan charts for UK inflation: Forecasting and sources of uncertainty in an evolving monetary system," CFS Working Paper Series 2003/44, Center for Financial Studies (CFS).
- Claudia Miani & Stefano Siviero, 2010. "A non-parametric model-based approach to uncertainty and risk analysis of macroeconomic forecast," Temi di discussione (Economic working papers) 758, Bank of Italy, Economic Research and International Relations Area.
- Prakash Kannan & Selim Elekdag, 2009. "Incorporating Market Information Into the Construction of the Fan Chart," IMF Working Papers 09/178, International Monetary Fund.
- Kenneth F. Wallis, 1999. "Asymmetric density forecasts of inflation and the Bank of England's fan chart," National Institute Economic Review, National Institute of Economic and Social Research, vol. 167(1), pages 106-112, January.
- Villani, Mattias & Larsson, Rolf, 2004. "The Multivariate Split Normal Distribution and Asymmetric Principal Components Analysis," Working Paper Series 175, Sveriges Riksbank (Central Bank of Sweden).
- Michal Franta & Jozef Barunik & Roman Horvath & Katerina Smidkova, 2011. "Are Bayesian Fan Charts Useful for Central Banks? Uncertainty, Forecasting, and Financial Stability Stress Tests," Working Papers 2011/10, Czech National Bank, Research Department.
- Knüppel, Malte & Schultefrankenfeld, Guido, 2011.
"How informative are central bank assessments of macroeconomic risks?,"
Discussion Paper Series 1: Economic Studies
2011,13, Deutsche Bundesbank, Research Centre.
- Malte Knüppel & Guido Schultefrankenfeld, 2012. "How Informative Are Central Bank Assessments of Macroeconomic Risks?," International Journal of Central Banking, International Journal of Central Banking, vol. 8(3), pages 87-139, September.
- Liao, Xin & Peng, Zuoxiang & Nadarajah, Saralees, 2013. "Asymptotic expansions for moments of skew-normal extremes," Statistics & Probability Letters, Elsevier, vol. 83(5), pages 1321-1329.
- Wojciech Charemza & Carlos Diaz & Svetlana Makarova, 2014. "Term Structure Of Inflation Forecast Uncertainties And Skew Normal Distributions," Discussion Papers in Economics 14/01, Department of Economics, University of Leicester.
- Liao, Xin & Peng, Zuoxiang & Nadarajah, Saralees & Wang, Xiaoqian, 2014. "Rates of convergence of extremes from skew-normal samples," Statistics & Probability Letters, Elsevier, vol. 84(C), pages 40-47.
- Michal Franta & Jozef Baruník & Roman Horváth & Katerina Smídková, 2014. "Are Bayesian Fan Charts Useful? The Effect of Zero Lower Bound and Evaluation of Financial Stability Stress Tests," International Journal of Central Banking, International Journal of Central Banking, vol. 10(1), pages 159-188, March.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (DEE-NTDD).
If references are entirely missing, you can add them using this form.