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

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Listed author(s):
  • 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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File URL: https://www.econstor.eu/bitstream/10419/19725/1/200814dkp.pdf
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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
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. Harding, Don & Pagan, Adrian, 2006. "Synchronization of cycles," Journal of Econometrics, Elsevier, vol. 132(1), pages 59-79, May.
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  8. West, Kenneth D., 2006. "Forecast Evaluation," Handbook of Economic Forecasting, Elsevier.
  9. 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.
  10. Diebold, Francis X & Mariano, Roberto S, 2002. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 134-144, January.
  11. Andrews, Donald W K, 1991. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Econometrica, Econometric Society, vol. 59(3), pages 817-858, May.
  12. 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.
  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 841-862, November.
  14. Wallis, Kenneth F, 1989. "Macroeconomic Forecasting: A Survey," Economic Journal, Royal Economic Society, vol. 99(394), pages 28-61, March.
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Cited by:

  1. 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.
  2. 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.
  3. Mihaela BRATU, 2012. "The prediction of inflation in Romania in uncertainty conditions," EuroEconomica, Danubius University of Galati, issue 1(31), pages 87-94, February.

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