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How might a central bank report uncertainty?

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  • Fair, Ray C.

Abstract

An important question for central banks is how they should report the uncertainty of their forecasts. This paper discusses a way in which a central bank could report the uncertainty of its forecasts in a world in which it used a single macroeconometric model to make its forecasts and guide its policies. Suggestions are then made as to what might be feasible for a central bank to report given that it is unlikely to be willing to commit to a single model. A particular model is used as an illustration.

Suggested Citation

  • Fair, Ray C., 2014. "How might a central bank report uncertainty?," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 8, pages 1-22.
  • Handle: RePEc:zbw:ifweej:201427
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    File URL: http://dx.doi.org/10.5018/economics-ejournal.ja.2014-27
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    File URL: https://www.econstor.eu/bitstream/10419/100653/1/792584066.pdf
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    References listed on IDEAS

    as
    1. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    2. Hess Chung & Jean‐Philippe Laforte & David Reifschneider & John C. Williams, 2012. "Have We Underestimated the Likelihood and Severity of Zero Lower Bound Events?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44, pages 47-82, February.
    3. Fair, Ray C & Taylor, John B, 1990. "Full Information Estimation and Stochastic Simulation of Models with Rational Expectations," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 5(4), pages 381-392, Oct.-Dec..
    4. Reifschneider, David & Willams, John C, 2000. "Three Lessons for Monetary Policy in a Low-Inflation Era," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(4), pages 936-966, November.
    5. Parke, William R, 1982. "An Algorithm for FIML and 3SLS Estimation of Large Nonlinear Models," Econometrica, Econometric Society, vol. 50(1), pages 81-95, January.
    6. David L. Reifschneider & John C. Williams, 2000. "Three lessons for monetary policy in a low-inflation era," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, pages 936-978.
    7. David L. Reifschneider & John C. Williams, 2000. "Three lessons for monetary policy in a low-inflation era," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, pages 936-978.
    8. David L. Reifschneider & Peter Tulip, 2007. "Gauging the uncertainty of the economic outlook from historical forecasting errors," Finance and Economics Discussion Series 2007-60, Board of Governors of the Federal Reserve System (U.S.).
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    Citations

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    Cited by:

    1. Marsay, David, 2016. "Decision-making under radical uncertainty: An interpretation of Keynes' treatise," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 10, pages 1-31.

    More about this item

    Keywords

    Central bank; uncertainty; stochastic simulation;

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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