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Activity Number:
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303
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Type:
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Topic Contributed
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Date/Time:
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Tuesday, August 4, 2009 : 10:30 AM to 12:20 PM
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Sponsor:
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Business and Economic Statistics Section
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| Abstract - #304145 |
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Title:
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Calibration and Resolution Diagnostics for Bank of England Density Forecasts
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Author(s):
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Simon van Norden*+ and John W. Galbraith
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Companies:
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HEC Montréal and McGill University
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Address:
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Service de l'enseignement de la finance, Montreal, QC, H3T 2a7, Canada
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Keywords:
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calibration ; resolution ; probability forecast ; density forecast ; hazard rate
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Abstract:
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This paper applies new diagnostics to the Bank of England's pioneering density forecasts (fan charts). We compute their implicit probability forecast for annual rates of inflation and output growth that exceed a given threshold (in this case, the target inflation rate and 2.5% respectively.) Unlike earlier work on these forecasts, we measure both their calibration and their resolution, providing both formal tests and graphical interpretations of the results. Our results both reinforce earlier evidence on some of the defects of these forecasts and provide new evidence on their information content.
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