The predictive power of ECB’s interval forecasts over point forecasts

Yoichi Tsuchiya

Applied Economics Letters, 2021, vol. 28, issue 16, 1413-1418

Abstract: This study examines interval forecasts released by the European Central Bank (ECB). To investigate whether these projections provide additional information over midpoint forecasts, we use a regression approach considering the interval nature of projections. The spread of a 3-month-ahead inflation forecast of the ECB has additional information for over midpoint forecasts while that of longer-term forecasts had no additional information. This indicates that the spread of a 3-month-ahead inflation forecast is a good indicator of uncertainty. Moreover, our finding suggests that the spread of a 3-month-ahead inflation forecast complements other measures of uncertainty that are often associated with declines in economic activity for longer term.

Date: 2021
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DOI: 10.1080/13504851.2020.1820439

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