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- Title
Monetary policy, data uncertainty and the supply side: living with the statistical fog.
- Abstract
Economic statistics are often only an approximation of the underlying reality they are attempting to measure. Official statistics, especially in timely first releases, can be subject to significant uncertainly and revision. In this speech, Marlan Bell, a member of the Monetary Policy Committee, looks at the various ways in which data uncertainty might arise and discusses how policymakers should respond. A particular difficulty for statisticians can be the allocation of movements in nominal variables to changes in prices and volumes. Such uncertainty is high when the structure of the economy and relative prices change significant. In such circumstances, looking at a money value measure of activity may be informative. Moreover-estimated levels of real activity appear more prone to revision than growth rates, so we should be wary of conventional, mechanical estimates of the output gap, which rely heavily on information on the level of activity. Ms Bell concludes that revisions to data stemming either from more information or methodological improvements will inevitably lead us to reassess our view of the underlying truth. Improvements to statistics art to be welcomed, and understanding the nature of data uncertainty and revisions should inform our judgements about the state of the world.
- Subjects
MONEY supply; ECONOMIC forecasting; STATISTICS; CURRENCY boards; MONETARY theory; ECONOMIC policy
- Publication
Bank of England Quarterly Bulletin, 2004, Vol 44, Issue 4, p510
- ISSN
0005-5166
- Publication type
Article