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

Author Info

  • 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.

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Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2008,14.

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Date of creation: 2008
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Handle: RePEc:zbw:bubdp1:7369
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Keywords: Forecast evaluation; risk forecasts; Bank of England inflation forecasts;

Find related papers by 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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  1. Wallis, Kenneth F, 1989. "Macroeconomic Forecasting: A Survey," Economic Journal, Royal Economic Society, vol. 99(394), pages 28-61, March.
  2. Dowd, Kevin, 2007. "Too good to be true? The (In)credibility of the UK inflation fan charts," Journal of Macroeconomics, Elsevier, vol. 29(1), pages 91-102, March.
  3. Diebold, Francis X & Mariano, Roberto S, 2002. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 134-44, January.
  4. M. Hashem Pesaran & Allan Timmermann, 2006. "Testing Dependence among Serially Correlated Multi-category Variables," CESifo Working Paper Series 1770, CESifo Group Munich.
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  7. West, Kenneth D., 2006. "Forecast Evaluation," Handbook of Economic Forecasting, Elsevier.
  8. Wallis, Kenneth F., 2001. "Chi-squared tests of interval and density forecasts and the Bank of England's fan charts," Working Paper Series 0083, European Central Bank.
  9. Kenneth F. Wallis, 2004. "An Assessment of Bank of England and National Institute Inflation Forecast Uncertainties," National Institute Economic Review, National Institute of Economic and Social Research, vol. 189(1), pages 64-71, July.
  10. Andrews, Donald W K, 1991. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Econometrica, Econometric Society, vol. 59(3), pages 817-58, May.
  11. repec:sae:niesru:v:167:y::i:1:p:106-112 is not listed on IDEAS
  12. Michael P. Clements, 2004. "Evaluating the Bank of England Density Forecasts of Inflation," Economic Journal, Royal Economic Society, vol. 114(498), pages 844-866, October.
  13. Christoffersen, Peter F, 1998. "Evaluating Interval Forecasts," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 841-62, November.
  14. Brown, Bryan W & Maital, Shlomo, 1981. "What Do Economists Know? An Empirical Study of Experts' Expectations," Econometrica, Econometric Society, vol. 49(2), pages 491-504, March.
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Cited by:

  1. Schultefrankenfeld, Guido, 2010. "Forecast uncertainty and the Bank of England interest rate decisions," Discussion Paper Series 1: Economic Studies 2010,27, Deutsche Bundesbank, Research Centre.
  2. 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.

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