Bayesian fan charts for UK inflation: Forecasting and sources of uncertainty in an evolving monetary system

Arbeitspapier

We estimate a Bayesian vector autoregression for the U.K. with drifting coefficients and stochastic volatilities. We use it to characterize posterior densities for several objects that are useful for designing and evaluating monetary policy, including local approximations to the mean, persistence, and volatility of inflation. We present diverse sources of uncertainty that impinge on the posterior predictive density for inflation, including model uncertainty, policy drift, structural shifts and other shocks. We use a recently developed minimum entropy method to bring outside information to bear on inflation forecasts. We compare our predictive densities with the Bank of England's fan charts.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CFS Working Paper ; No. 2003/44

Classification and Topics

• Classification: Wirtschaft
• Subject: Inflation ; Prognoseverfahren ; Bayes-Statistik ; Großbritannien

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Cogley, Timothy W. ; Morozov, Sergei ; Sargent, Thomas J.
• Event: Veröffentlichung
• (who): Goethe University Frankfurt, Center for Financial Studies (CFS)
• (where): Frankfurt a. M.
• (when): 2003

Further information

• Handle: http://hdl.handle.net/10419/25403
• URN: urn:nbn:de:hebis:30-10482
• Last update: 10.03.2025, 11:43 AM CET