Title: Measuring uncertainty and assessing its predictive power in the euro area
Authors: PONCELA BLANCO MARIA DEL PILARSENRA EVA
Citation: EMPIRICAL ECONOMICS vol. 53 no. 1 p. 165-182
Publisher: PHYSICA-VERLAG GMBH & CO
Publication Year: 2017
JRC N°: JRC101027
ISSN: 0377-7332
URI: http://link.springer.com/article/10.1007/s00181-016-1181-6
http://publications.jrc.ec.europa.eu/repository/handle/JRC101027
DOI: 10.1007/s00181-016-1181-6
Type: Articles in periodicals and books
Abstract: Expectations and uncertainty play a key role in economic behaviour. This paper deals with both, expectations and uncertainty derived from the European Central Bank Survey of Professional Forecasters. Given the strong turbulences that the euro area macroeconomic indicators observe since 2007, the aim of the paper is to check whether there is any room for improvement of the consensus forecast accuracy for GDP growth and inflation when accounting for uncertainty. We propose a new measure of uncertainty, alternative to the ad-hoc equal weights commonly used, based on principal components. We test the role of uncertainty in forecasting macroeconomic performance in the euro area between 2005-2015. We also check the role of surprises in the considered forecasting sample.
JRC Directorate:Growth and Innovation

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