Fan Charts as Useful ‘Maps’ for an Inflation-Targeting Central Bank: An Illustration of the Sveriges Riksbank’s Method for Presenting Density Forecasts of Inflation

Vineet Virmani

No WP2004-04-03, IIMA Working Papers from Indian Institute of Management Ahmedabad, Research and Publication Department

Abstract: In this study I illustrate the usefulness of Fan Charts for a central bank and show how they can be used to present its viewpoint on likely paths of future inflation. Exploiting a bivariate unobserved components model, I use the methodology followed by Blix and Sellin (1998) to demonstrate how subjective judgements can be systematically incorporated into model-based forecasts and effectively presented in a graphic manner.

Date: 2004-04-03
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