IDEAS home Printed from https://ideas.repec.org/p/hhs/rbnkwp/0102.html
   My bibliography  Save this paper

A Bivariate Distribution for Inflation and Output Forecasts

Author

Listed:
  • Blix, Mårten

    (Monetary Policy Department, Central Bank of Sweden)

  • Sellin, Peter

    () (Monetary Policy Department, Central Bank of Sweden)

Abstract

The contribution of this paper is to derive a bivariate distribution for inflation and output uncertainty with a well-defined role for subjective judgements. The marginal distributions for inflation and output growth are derived from uncertainty in the macro variables that are deemed to be important for future inflation and output growth. The uncertainty in the macro variables is based on their historical standard deviations, but we allow these to be subjectively adjusted if there is reason to be more or less uncertain than historically. We also allow for a subjective assessment of the balance of risk, i.e. whether the distributions are symmetric or not. Given the marginal distributions for inflation and output growth we derive a bivariate distribution using the translation method. Having derived the bivariate distribution we are in a position to discuss inflation forecast uncertainty conditional on the growth of output (or vice versa). The analysis can readily be extended to the case of more than two variables.

Suggested Citation

  • Blix, Mårten & Sellin, Peter, 2000. "A Bivariate Distribution for Inflation and Output Forecasts," Working Paper Series 102, Sveriges Riksbank (Central Bank of Sweden).
  • Handle: RePEc:hhs:rbnkwp:0102
    as

    Download full text from publisher

    File URL: http://www.riksbank.com/upload/3832/WP_102.pdf
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. al-Nowaihi, Ali & Stracca, Livio, 2002. "Non-standard central bank loss functions, skewed risks, and certainty equivalence," Working Paper Series 0129, European Central Bank.
    2. Berg, Claes & Jansson, Per & Vredin, Anders, 2004. "How Useful are Simple Rules for Monetary Policy? The Swedish Experience," Working Paper Series 169, Sveriges Riksbank (Central Bank of Sweden).

    More about this item

    Keywords

    Inflation forecast; Output forecast; Conditional forecasts; Two-piece normal distribution; Translation method; Johnson system;

    JEL classification:

    • C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Other
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E39 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Other

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:hhs:rbnkwp:0102. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lena Löfgren). General contact details of provider: http://edirc.repec.org/data/rbgovse.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.