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

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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.

Original languageEnglish
JournalApplied Economics Letters
DOIs
Publication statusAccepted/In press - 2020

Keywords

  • Range forecasts
  • central bank communication
  • interval forecasts
  • monetary policy

ASJC Scopus subject areas

  • Economics and Econometrics

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