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Working Paper
Constructing Fan Charts from the Ragged Edge of SPF Forecasts
We develop a model that permits the estimation of a term structure of both expectations and forecast uncertainty for application to professional forecasts such as the Survey of Professional Forecasters (SPF). Our approach exactly replicates a given data set of predictions from the SPF (or a similar forecast source) without measurement error. Our model captures fixed horizon and fixed-event forecasts, and can accommodate changes in the maximal forecast horizon available from the SPF. The model casts a decomposition of multi-period forecast errors into a sequence of forecast updates that may be ...
Working Paper
Modeling Time-Varying Uncertainty of Multiple-Horizon Forecast Errors
We develop uncertainty measures for point forecasts from surveys such as the Survey of Professional Forecasters, Blue Chip, or the Federal Open Market Committee?s Summary of Economic Projections. At a given point of time, these surveys provide forecasts for macroeconomic variables at multiple horizons. To track time-varying uncertainty in the associated forecast errors, we derive a multiple-horizon specification of stochastic volatility. Compared to constant-variance approaches, our stochastic-volatility model improves the accuracy of uncertainty measures for survey forecasts.
Working Paper
Gauging the Uncertainty of the Economic Outlook Using Historical Forecasting Errors : The Federal Reserve's Approach
Since November 2007, the Federal Open Market Committee (FOMC) of the U.S. Federal Reserve has regularly published participants? qualitative assessments of the uncertainty attending their individual forecasts of real activity and inflation, expressed relative to that seen on average in the past. The benchmarks used for these historical comparisons are the average root mean squared forecast errors (RMSEs) made by various private and government forecasters over the past twenty years. This paper documents how these benchmarks are constructed and discusses some of their properties. We draw several ...
Working Paper
Modeling Time-Varying Uncertainty of Multiple-Horizon Forecast Errors
We estimate uncertainty measures for point forecasts obtained from survey data, pooling information embedded in observed forecast errors for different forecast horizons. To track time-varying uncertainty in the associated forecast errors, we derive a multiple-horizon specification of stochastic volatility. We apply our method to forecasts for various macroeconomic variables from the Survey of Professional Forecasters. Compared to constant variance approaches, our stochastic volatility model improves the accuracy of uncertainty measures for survey forecasts. Our method can also be applied to ...
Working Paper
What is the Predictive Value of SPF Point and Density Forecasts?
This paper presents a new approach to combining the information in point and density forecasts from the Survey of Professional Forecasters (SPF) and assesses the incremental value of the density forecasts. Our starting point is a model, developed in companion work, that constructs quarterly term structures of expectations and uncertainty from SPF point forecasts for quarterly fixed horizons and annual fixed events. We then employ entropic tilting to bring the density forecast information contained in the SPF’s probability bins to bear on the model estimates. In a novel application of ...