Forecast Uncertainties in Macroeconomics Modelling: An Application to the UK Economy

Anthony Garratt (), Kevin Lee (), Mohammad Pesaran and Yongcheol Shin

Edinburgh School of Economics Discussion Paper Series from Edinburgh School of Economics, University of Edinburgh

Abstract: This paper argues that probability forecasts convey information on the uncertainties that surround macro-economic forecast in straightforward manner which is preferable to other alternatives, including the use of confidence intervals. Point and probability forecasts obtained using a small macro-economic model are presented and evaluated using recursive forecasts generated from the model over the period 1999-2000. Out of sample probability forecasts of inflation and output growth are also provided over the period 2001-2003, and their implications discussed in relation to the Bank of England's inflation target and the need to avoid recessions, both as separate events and jointly. It is also shown how the probability forecasts can be used to provide insights on the inter-relationship of output growth and inflation at different horizons.

Keywords: probability forecasting; long run structural VARs; macroeconometric modelling; forecast evaluation; probability forecasts of inflation; output growth (search for similar items in EconPapers)
JEL-codes: C32 C53 E17 (search for similar items in EconPapers)
Pages: 39
Date: 2001-12
New Economics Papers: this item is included in nep-ecm
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Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Forecast Uncertainties in Macroeconomic Modeling: An Application to the U.K. Economy (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:edn:esedps:64

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