Joint Prediction Bands for Macroeconomic Risk Management

Qaisar Akram, Andrew Binning and Junior Maih

No No 5/2016, Working Papers from Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School

Abstract: In this paper we address the issue of assessing and communicating the joint probabilities implied by density forecasts from multivariate time series models. We focus our attention in three areas. First, we investigate a new method of producing fan charts that better communicates the uncertainty present in forecasts from multivariate time series models. Second, we suggest a new measure for assessing the plausibility of non-central point forecasts. And third, we describe how to use the density forecasts from a multivariate time series model to assess the probability of a set of future events occurring. An additional novelty of this paper is our use of a regime-switching DSGE model with an occasionally binding zero lower bound constraint, estimated on US data, to produce the density forecasts. The tools we offer will allow practitioners to better assess and communicate joint forecast probabilities, a criticism that has been leveled at central bank communications.

Keywords: Monetary Policy; Fan charts; DSGE; Zero Lower Bound; Regime-switching; Bayesian Estimation (search for similar items in EconPapers)
Pages: 22 pages
Date: 2016-05
New Economics Papers: this item is included in nep-dge, nep-ecm, nep-for, nep-pr~ and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.bi.edu/contentassets/e9c498f5290f4364b ... king_camp_5-2016.pdf (application/pdf)

Related works:
Working Paper: Joint prediction bands for macroeconomic risk management (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bny:wpaper:0045

Access Statistics for this paper

More papers in Working Papers from Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School Contact information at EDIRC.
Bibliographic data for series maintained by Helene Olsen ().