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How informative are central bank assessments of macroeconomic risks?

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  • Knüppel, Malte
  • Schultefrankenfeld, Guido

Abstract

Surveying the forecasting practice of several central banks, we find that all these banks issue statements about risks to their macroeconomic forecasts. Often the balance of these risks is assessed as well. Upward [downward] risks to the forecast commonly imply that the outturn is expected to lie above [below] the central forecast. Investigating the inflation risk forecasts of the Bank of England and the Sveriges Riksbank, however, we do not find conclusive evidence for informativeness, that is, for a systematic connection between risk assessments and forecast errors. Thus, it seems questionable whether macroeconomic risk forecasts are meaningful. --

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Bibliographic Info

Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2011,13.

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Date of creation: 2011
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Handle: RePEc:zbw:bubdp1:201113

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Keywords: forecast evaluation; risk forecasts; inflation forecasts;

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References

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  1. Eric Leeper, 2003. "An "Inflation Reports" Report," NBER Working Papers 10089, National Bureau of Economic Research, Inc.
  2. 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.
  3. Francis X. Diebold & Jose A. Lopez, 1996. "Forecast Evaluation and Combination," NBER Technical Working Papers 0192, National Bureau of Economic Research, Inc.
  4. Wallis, Kenneth F, 1989. "Macroeconomic Forecasting: A Survey," Economic Journal, Royal Economic Society, vol. 99(394), pages 28-61, March.
  5. Andrews, Donald W K, 1991. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Econometrica, Econometric Society, vol. 59(3), pages 817-58, May.
  6. Prakash Kannan & Selim Elekdag, 2009. "Incorporating Market Information Into the Construction of the Fan Chart," IMF Working Papers 09/178, International Monetary Fund.
  7. Lutz Kilian & Simone Manganelli, 2007. "Quantifying the Risk of Deflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(2-3), pages 561-590, 03.
  8. Paul Conway, 2000. "Monetary policy in an uncertain world," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 63, September.
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Cited by:
  1. Schultefrankenfeld Guido, 2013. "Forecast uncertainty and the Bank of England’s interest rate decisions," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 17(1), pages 1-20, February.

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