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How informative are macroeconomic risk forecasts? An examination of the Bank of England's inflation forecasts

Author

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  • Knüppel, Malte
  • Schultefrankenfeld, Guido

Abstract

Macroeconomic risk assessments play an important role in the forecasts of many institutions. However, to the best of our knowledge their performance has not been investigated yet. In this work, we study the Bank of England?s risk forecasts for inflation. We find that these forecasts do not contain the intended information. Rather, they either have no information content, or even an adverse information content. Our results imply that under mean squared error loss, it is better to use the Bank of England?s mode forecasts than the Bank of England?s mean forecasts.

Suggested Citation

  • Knüppel, Malte & Schultefrankenfeld, Guido, 2008. "How informative are macroeconomic risk forecasts? An examination of the Bank of England's inflation forecasts," Discussion Paper Series 1: Economic Studies 2008,14, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdp1:7369
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    References listed on IDEAS

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    1. West, Kenneth D., 2006. "Forecast Evaluation," Handbook of Economic Forecasting, in: G. Elliott & C. Granger & A. Timmermann (ed.),Handbook of Economic Forecasting, edition 1, volume 1, chapter 3, pages 99-134, Elsevier.
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    6. Wallis, Kenneth F., 2003. "Chi-squared tests of interval and density forecasts, and the Bank of England's fan charts," International Journal of Forecasting, Elsevier, vol. 19(2), pages 165-175.
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    Citations

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    Cited by:

    1. Schultefrankenfeld Guido, 2013. "Forecast uncertainty and the Bank of England’s interest rate decisions," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 17(1), pages 1-20, February.
    2. Karolina Tura-Gawron, 2016. "Credibility Of Central Banks Inflation Forecasts," GUT FME Working Paper Series A 37, Faculty of Management and Economics, Gdansk University of Technology.
    3. Bratu, Mihaela, 2013. "The Assessment And Improvement Of The Accuracy For The Forecast Intervals," Working Papers of Macroeconomic Modelling Seminar 132602, Institute for Economic Forecasting.
    4. Tura-Gawron, Karolina, 2019. "Consumers’ approach to the credibility of the inflation forecasts published by central banks: A new methodological solution," Journal of Macroeconomics, Elsevier, vol. 62(C).
    5. Mihaela BRATU, 2012. "The prediction of inflation in Romania in uncertainty conditions," EuroEconomica, Danubius University of Galati, issue 1(31), pages 87-94, February.

    More about this item

    Keywords

    Forecast evaluation; risk forecasts; Bank of England inflation forecasts;

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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