Scenario Synthesis and Macroeconomic Risk

Tobias Adrian, Domenico Giannone, Matteo Luciani and Mike West

No 2025/105, IMF Working Papers from International Monetary Fund

Abstract: We develop methodology to bridge scenario analysis and risk forecasting, leveraging their respective strengths in policy settings. The methodology, rooted in Bayesian analysis, addresses the fundamental challenge of reconciling judgmental narrative approaches with statistical forecasting. Analysis evaluates explicit measures of concordance of scenarios with a reference forecasting model, delivers predictive synthesis of the scenarios to best match that reference, and addresses scenario set incompleteness. This provides a framework to systematically evaluate and integrate risks from different scenarios, aiding forecasting in policy institutions while supporting clear and rigorous communication of evolving risks. We also discuss broader questions of integrating judgmental information with statistical model-based forecasts in the face of as-yet unmodeled circumstances.

Keywords: Macroeconomic Forecasting; Mixtures of Scenarios; Misclassification Rates; Entropic Tilting; Bayesian Predictive Synthesis; Judgmental Forecasting; Forecast Risk Assessment; risk forecasting; scenario analysis; Constitution avenue NW; Durham, nc 27708; scenario synthesis; NY Fed; Macroeconomic risks; External sector statistics; Stress testing; Capital markets; Financial sector stability; Global (search for similar items in EconPapers)
Pages: 30
Date: 2025-05-30
New Economics Papers: this item is included in nep-for
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=566954 (application/pdf)

Related works:
Working Paper: Scenario Synthesis and Macroeconomic Risk (2025)
Working Paper: Scenario Synthesis and Macroeconomic Risk (2025)
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:imf:imfwpa:2025/105

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().