IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

A State Space Approach To The Policymaker's Data Uncertainty Problem

  • Alastair Cunningham

    (Bank of England)

  • Chris Jeffery

    (Bank of England)

  • George Kapetanios

    (Queen Mary and WestÂ…eld College and Bank of England)

  • Vincent Labhard

    (European Central Bank)

The paper describes the challenges that uncertainty over the true value of key macroeconomic variables poses for policymakers and the way in which they may form and update their priors in light of a range of indicators. Speci…cally, it casts the data uncertainty challenge in state space form and illustrates - in this setting - how the policymaker’s data uncertainty problem is related to any constraints that an optimising statistical agency might face in resolving its own data uncertainty challenge. The paper uses this intuition to motivate a set of identifying assumptions that might be used in the practical application of the Kalman Filter to form and update priors on the basis of a variety of indicators. In doing so, it moves beyond the simple methodology for deriving "best guesses" of the true value of economic variables outlined in Ashley, Driver, Hayes, and Je¤ery (2005)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://repec.org/mmf2006/up.10287.1159526154.pdf
Download Restriction: no

Paper provided by Money Macro and Finance Research Group in its series Money Macro and Finance (MMF) Research Group Conference 2006 with number 168.

as
in new window

Length:
Date of creation: 02 Feb 2007
Date of revision:
Handle: RePEc:mmf:mmfc06:168
Contact details of provider: Web page: http://www.essex.ac.uk/afm/mmf/index.html

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Yates, Tony & Richard Harrison & George Kapetanios, 2003. "Forecasting with measurement errors in dynamic models," Royal Economic Society Annual Conference 2003 225, Royal Economic Society.
  2. Sargent, Thomas J, 1989. "Two Models of Measurements and the Investment Accelerator," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 251-87, April.
  3. Orphanides, Athanasios, 2003. "The quest for prosperity without inflation," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 633-663, April.
  4. Evans, Martin D.D., 2005. "Where Are We Now? Real-Time Estimates of the Macro Economy," CEPR Discussion Papers 5270, C.E.P.R. Discussion Papers.
  5. Durbin, James & Koopman, Siem Jan, 2001. "Time Series Analysis by State Space Methods," OUP Catalogue, Oxford University Press, number 9780198523543.
  6. Anthony Garratt & Kevin Lee & Emi Mise & Kalvinder Shields, 2008. "Real-Time Representations of the Output Gap," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 792-804, November.
  7. Howrey, E Philip, 1978. "The Use of Preliminary Data in Econometric Forecasting," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 193-200, May.
  8. George Kapetanios & Tony Yates, 2004. "Estimating time-variation in measurement error from data revisions; an application to forecasting in dynamic models," Bank of England working papers 238, Bank of England.
  9. Sharon Kozicki, 2004. "How do data revisions affect the evaluation and conduct of monetary policy?," Economic Review, Federal Reserve Bank of Kansas City, issue Q I, pages 5-38.
  10. Anthony Garratt & Shaun P Vahey, 2005. "UK Real-Time Macro Data Characteristics," Birkbeck Working Papers in Economics and Finance 0502, Birkbeck, Department of Economics, Mathematics & Statistics.
  11. N. Gregory Mankiw & Matthew D. Shapiro, 1986. "News or Noise? An Analysis of GNP Revisions," NBER Working Papers 1939, National Bureau of Economic Research, Inc.
  12. Weale, Martin, 1985. "Testing Linear Hypotheses on National Account Data," The Review of Economics and Statistics, MIT Press, vol. 67(4), pages 685-89, November.
  13. Doran, Howard E, 1992. "Constraining Kalman Filter and Smoothing Estimates to Satisfy Time-Varying Restrictions," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 568-72, August.
  14. Patterson, K. D., 1994. "A state space model for reducing the uncertainty associated with preliminary vintages of data with an application to aggregate consumption," Economics Letters, Elsevier, vol. 46(3), pages 215-222, November.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:mmf:mmfc06:168. 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: (Christopher F. Baum)

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.