Investigating uncertainty in macroeconomic forecasts by stochastic simulation
We investigate four sources of uncertainty with CPBâ€™s macroeconomic model SAFFIER: provisional data, exogenous variables, model parameters and residuals of behavioural equations. Uncertainty is an inherent attribute of any forecast. We apply a Monte Carlo simulation technique to calculate standard errors for the short-term and medium-term horizon for GDP and eight other macroeconomic variables. The results demonstrate that the main contribution to the total variance of a medium-term forecast emanates from the uncertainty in the exogenous variables. For the short-term forecast both exogenous variables and provisional data are most relevant.
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- Alexei Onatski & Noah Williams, 2003.
"Modeling Model Uncertainty,"
Journal of the European Economic Association,
MIT Press, vol. 1(5), pages 1087-1122, 09.
- Onatski, Alexei & Williams, Noah, 2002. "Modeling model uncertainty," Working Paper Series 0169, European Central Bank.
- Alexei Onatski & Noah Williams, 2003. "Modeling Model Uncertainty," NBER Working Papers 9566, National Bureau of Economic Research, Inc.
- Fair Ray C, 2003. "Bootstrapping Macroeconometric Models," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 7(4), pages 1-26, December.
- Ray C. Fair, 2001. "Bootstrapping Macroeconometric Models," Cowles Foundation Discussion Papers 1345, Cowles Foundation for Research in Economics, Yale University, revised Jun 2003.
- Ray Fair, 2002. "Bootstrapping Macroeconometric Models," Yale School of Management Working Papers ysm254, Yale School of Management, revised 01 Aug 2007.
- Nigel Pain & Ray Barrell & Dawn Holland, 2001. "Openness, integration and transition: prospects and policies for economies in transition," NIESR Discussion Papers 177, National Institute of Economic and Social Research.
- Canova, Fabio, 1995. "Sensitivity Analysis and Model Evaluation in Simulated Dynamic General Equilibrium Economies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(2), pages 477-501, May. Full references (including those not matched with items on IDEAS)
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