The Role of Macroeconomic, Policy, and Forecaster Uncertainty in Forecast Dispersion

You Li () and Anthony Tay ()
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You Li: School of Economics, Singapore Management University
Anthony Tay: School of Economics, Singapore Management University

No 1-2018, Economics and Statistics Working Papers from Singapore Management University, School of Economics

Abstract: We explore the role of uncertainty in explaining dispersion in professional forecasters’ density forecasts of real output growth and inflation. We consider three separate notions of uncertainty: general macroeconomic uncertainty (the fact that macroeconomic variables are easier to forecast at some times than at others), policy uncertainty, and forecaster uncertainty. We find that dispersion in individual density forecasts is related to overall macroeconomic uncertainty and policy uncertainty, while forecaster uncertainty (which we define as the average in the uncertainty expressed by individual forecasters) appears to have little role in forecast dispersion.

Pages: 40 pages
Date: 2017-11-01
New Economics Papers: this item is included in nep-for, nep-mac and nep-sea
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