FORECAST UNCERTAINTY, ITS REPRESENTATION AND EVALUATION

Abstract

AbstractThe following sections are included:IntroductionMotivationOverviewA theoretical illustrationExampleGeneralisationsForecast evaluationMeasuring and Reporting Forecast UncertaintyModel-based measures of forecast uncertaintyThe linear regression modelEstimation error in multi-step forecastsStochastic simulation in non-linear modelsLoss functionsModel uncertaintyEmpirical measures of forecast uncertaintyReporting forecast uncertaintyForecast intervalsDensity forecastsGraphical presentationsAdditional examplesForecast scenariosUncertainty and disagreement in survey forecastsEvaluating Interval and Density ForecastsLikelihood ratio tests of interval forecastsChi-squared tests of interval forecastsExtensions to density forecastsThe probability integral transformationThe inverse normal transformationThe Bank of England's inflation forecastsComparing density forecastsConclusionReferences