Forecast accuracy and efficiency at the Bank of England – and how errors can be leveraged to do better

Derrick Kanngiesser () and Tim Willems ()
Additional contact information
Derrick Kanngiesser: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH
Tim Willems: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH

No 1078, Bank of England working papers from Bank of England

Abstract: We propose a systematic approach for central banks to leverage past forecasts (and associated errors) with the aim of learning more about the structure and functioning of the underlying economy. Applying this method to forecasts made by the Bank of England’s Monetary Policy Committee since 2011, we find that its forecasts have tended to underestimate pass‑through from wage growth, whilst also featuring a Phillips curve that is too flat. Regarding the effects of monetary policy, our results point to transmission via inflation expectations possibly having played a bigger role than attributed to it in the forecast. We also provide a more classical evaluation of forecast errors – finding inflation forecasts to have been unbiased. At the same time, however, inflation forecasts tend to be less accurate than those for real GDP growth, unemployment, and wage growth. This seems attributable to greater inherent uncertainties in the inflation process.

Keywords: Forecasting; forecast error analysis; monetary policy (search for similar items in EconPapers)
JEL-codes: E32 E47 E62 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2024-08-06
New Economics Papers: this item is included in nep-cba, nep-for and nep-mon
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.bankofengland.co.uk/-/media/boe/files/ ... ged-to-do-better.pdf Full text (application/pdf)

Related works:
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:boe:boeewp:1078

Access Statistics for this paper

More papers in Bank of England working papers from Bank of England Bank of England, Threadneedle Street, London, EC2R 8AH. Contact information at EDIRC.
Bibliographic data for series maintained by Digital Media Team ().