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- Title
Assessing the MPCs fan charts.
- Authors
Elder, Rob; Taylor, Tim; Yates, Tony
- Abstract
The MPC places considerable weight on its economic forecasts when setting monetary policy. But there is inevitably uncertainty around the outlook for the economy, and to communicate this, the MPC publishes its projections as fan charts. This article discusses some of the issues that must be taken into account when assessing those fan charts, it reports a range of formal and informal tests of various aspects of the MPC's fan charts, and it discusses developments in the economy that may have pushed outturns away from the MPC's central projections. With only six years of fan chart projections that can be compared with outturns, the sample is too small to draw strong conclusions. But to date, at most forecast horizons, inflation and output growth outcomes have been dispersed broadly in line with the MPC's fan chart bands. Thai suggests that the fan charts gave a reasonably good guide to the probabilities and risks facing the MPC. INSETS: Which measure of central tendency should we focus on?;Why multi step ahead forecasts often generate persistent forecast;Revisions to GDP growth in 1999/2000;Forecast revisions
- Subjects
MONETARY policy; ECONOMIC policy; CENTRAL banking industry; FINANCE; ECONOMIC forecasting
- Publication
Bank of England Quarterly Bulletin, 2005, Vol 45, Issue 3, p326
- ISSN
0005-5166
- Publication type
Article