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The Measurement and Behavior of Uncertainty: Evidence from the ECB Survey of Professional Forecasters

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  • Joshua Abel
  • Robert Rich
  • Joseph Song
  • Joseph Tracy

Abstract

We examine matched point and density forecasts of output growth, inflation and unemployment from the ECB Survey of Professional Forecasters. We construct measures of uncertainty from individual histograms, and find that the measures display countercyclical behavior and have increased across all forecast horizons since 2007. We also derive measures of forecast dispersion and forecast accuracy, and find that they are not reliable proxies for uncertainty. There is, however, evidence of a meaningful co‐movement between uncertainty and aggregate point predictions for output growth and unemployment. These results are robust to changes in the composition of the survey respondents over time. Copyright © 2015 John Wiley & Sons, Ltd.

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  • Joshua Abel & Robert Rich & Joseph Song & Joseph Tracy, 2016. "The Measurement and Behavior of Uncertainty: Evidence from the ECB Survey of Professional Forecasters," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 31(3), pages 533-550, April.
  • Handle: RePEc:wly:japmet:v:31:y:2016:i:3:p:533-550
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    Cited by:

    1. Clements, Michael P., 2018. "Are macroeconomic density forecasts informative?," International Journal of Forecasting, Elsevier, vol. 34(2), pages 181-198.
    2. Oinonen, Sami & Paloviita, Maritta, 2014. "Analysis of aggregated inflation expectations based on the ECB SPF survey," Research Discussion Papers 29/2014, Bank of Finland.
    3. Katharina Glass & Ulrich Fritsche, 2015. "Real-time Macroeconomic Data and Uncertainty," Macroeconomics and Finance Series 201406, University of Hamburg, Department of Socioeconomics.
    4. repec:eee:ecmode:v:72:y:2018:i:c:p:132-139 is not listed on IDEAS
    5. Ambrocio, Gene, 2017. "The real effects of overconfidence and fundamental uncertainty shocks," Research Discussion Papers 37/2017, Bank of Finland.
    6. repec:eee:ecmode:v:70:y:2018:i:c:p:288-300 is not listed on IDEAS
    7. Njindan Iyke, Bernard & Ho, Sin-Yu, 2018. "Inflation, Inflation Uncertainty, and Growth: Evidence from Ghana," MPRA Paper 85191, University Library of Munich, Germany.
    8. Hartmann, Matthias & Herwartz, Helmut & Ulm, Maren, 2017. "A comparative assessment of alternative ex ante measures of inflation uncertainty," International Journal of Forecasting, Elsevier, vol. 33(1), pages 76-89.
    9. Rich, Robert W. & Tracy, Joseph, 2017. "The behavior of uncertainty and disagreement and their roles in economic prediction: a panel analysis," Staff Reports 808, Federal Reserve Bank of New York.
    10. Tomasz Łyziak & Maritta Paloviita, 2017. "Formation of inflation expectations in turbulent times. Recent evidence from the European Survey of Professional Forecasters," NBP Working Papers 261, Narodowy Bank Polski, Economic Research Department.
    11. Amélie Charles & Olivier Darné & Laurent Ferrara, 2014. "Does the Great Recession imply the end of the Great Moderation? International evidence," EconomiX Working Papers 2014-21, University of Paris Nanterre, EconomiX.
    12. Falck, Elisabeth & Hoffmann, Mathias & Hürtgen, Patrick, 2017. "Disagreement and monetary policy," Discussion Papers 29/2017, Deutsche Bundesbank.
    13. repec:spr:empeco:v:53:y:2017:i:1:d:10.1007_s00181-017-1228-3 is not listed on IDEAS
    14. repec:spr:empeco:v:53:y:2017:i:1:d:10.1007_s00181-017-1248-z is not listed on IDEAS
    15. Paloviita, Maritta & Virén, Matti, 2014. "Analysis of forecast errors in micro-level survey data," Research Discussion Papers 8/2014, Bank of Finland.
    16. repec:lrk:eeaart:36_1_16 is not listed on IDEAS
    17. repec:eee:intfor:v:34:y:2018:i:1:p:105-116 is not listed on IDEAS
    18. repec:spr:empeco:v:53:y:2017:i:1:d:10.1007_s00181-016-1181-6 is not listed on IDEAS
    19. Hur, Joonyoung & Kim, Insu, 2017. "Inattentive agents and disagreement about economic activity," Economic Modelling, Elsevier, vol. 63(C), pages 175-190.
    20. Łyziak, Tomasz & Paloviita, Maritta, 2017. "Formation of inflation expectations in turbulent times : Can ECB manage inflation expectations of professional forecasters?," Research Discussion Papers 13/2017, Bank of Finland.
    21. Andrade, P. & Ghysels, E. & Idier, J., 2012. "Tails of Inflation Forecasts and Tales of Monetary Policy," Working papers 407, Banque de France.
    22. Sami Oinonen & Maritta Paloviita, 2017. "How Informative are Aggregated Inflation Expectations? Evidence from the ECB Survey of Professional Forecasters," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 13(2), pages 139-163, November.
    23. repec:eee:phsmap:v:505:y:2018:i:c:p:490-499 is not listed on IDEAS
    24. Knüppel, Malte, 2018. "Forecast-error-based estimation of forecast uncertainty when the horizon is increased," International Journal of Forecasting, Elsevier, vol. 34(1), pages 105-116.
    25. O. Grishchenko & S. Mouabbi & J.-P. Renne, 2017. "The Joint Dynamics of U.S. and Euro-area Inflation Rates: Expectations and Time-varying Uncertainty," Working papers 622, Banque de France.

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