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The Uncertainty of the Economic Outlook and Central Banks' Communications

Author

Listed:
  • Koji Nakamura

    (Bank of Japan)

  • Shinichiro Nagae

    (Bank of Japan)

Abstract

Central Banks make policy decisions based on their outlook for economic activity and prices. They pay attention not only to central projections, but also to the projection uncertainty and the balance of risks. Central banks place importance on evaluations of the uncertainty and the balance of risks in their communications. They use various methods suitable to each bank's situation, such as the Bank of Japan's "Risk Balance Chart" published this April. When evaluating the uncertainty of economic projections, the historical forecast error is one reference. The real GDP growth and CPI inflation forecast errors for one year ahead are large in each economy, at about one percent for real GDP growth and 0.5 percent to one percent for CPI inflation.

Suggested Citation

  • Koji Nakamura & Shinichiro Nagae, 2008. "The Uncertainty of the Economic Outlook and Central Banks' Communications," Bank of Japan Review Series 08-E-1, Bank of Japan.
    • Handle: RePEc:boj:bojrev:08-e-1
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