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Modeling Time-Varying Uncertainty of Multiple-Horizon Forecast Errors

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Abstract

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.

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  • Todd E. Clark & Michael W. McCracken & Elmar Mertens, 2017. "Modeling Time-Varying Uncertainty of Multiple-Horizon Forecast Errors," Working Papers (Old Series) 1715, Federal Reserve Bank of Cleveland.
    • Handle: RePEc:fip:fedcwp:1715
    DOI: 10.26509/frbc-wp-201715
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    More about this item

    Keywords

    Stochastic volatility; survey forecasts; fan charts;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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