IDEAS home Printed from https://ideas.repec.org/a/spr/empeco/v68y2025i6d10.1007_s00181-025-02720-5.html
   My bibliography  Save this article

Variance and skewness in density forecasts: assessing world GDP growth

Author

Listed:
  • Fabian Mendez Ramos

    (World Bank Group)

Abstract

This paper introduces a novel methodology, Bayesian cross-entropy forecasting (BCEF), for predicting the variance and skewness of density forecasts. BCEF evaluates the first-order effects of risk factors on the variability and asymmetry of predictive distributions, enabling a clear assessment of a forecasted variable’s upside and downside risks. A key innovation of BCEF lies in its ability to decompose variance and skewness within density forecasts, providing a robust framework for uncertainty analysis. By leveraging the two-piece normal distribution, BCEF generates asymmetric density forecasts incorporating forward-looking information from expectation surveys and statistical outputs of predictive models. The methodology's effectiveness is demonstrated through its application to world GDP growth forecasts using data from October 2005 to August 2015. The results, evaluated using the continuous-ranked probability score, show that BCEF fan charts are more accurate and consistently outperform standard symmetric and calibrated asymmetric density forecast benchmarks.

Suggested Citation

  • Fabian Mendez Ramos, 2025. "Variance and skewness in density forecasts: assessing world GDP growth," Empirical Economics, Springer, vol. 68(6), pages 2897-2932, June.
  • Handle: RePEc:spr:empeco:v:68:y:2025:i:6:d:10.1007_s00181-025-02720-5
    DOI: 10.1007/s00181-025-02720-5
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s00181-025-02720-5
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.

    File URL: https://libkey.io/10.1007/s00181-025-02720-5?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Non-symmetric density forecasts; Forecast uncertainty; Bayesian cross-entropy; Bayesian estimation; Kullback–Leibler divergence; Scoring rules; The continuous-ranked probability score; World GDP growth; Implied volatility; Consensus forecasts; The balance of risks; Variance decomposition; Skewness decomposition;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:empeco:v:68:y:2025:i:6:d:10.1007_s00181-025-02720-5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.