Conditional Term Structure of Inflation Forecast Uncertainty: The Copula Approach

Wojciech Charemza, Carlos Díaz () and Svetlana Makarova ()
Additional contact information
Svetlana Makarova: University College London, UK.

Journal for Economic Forecasting, 2019, issue 1, 5-18

Abstract: The paper introduces the concept of conditional inflation forecast uncertainty. It is proposed that the joint and conditional distributions of the bivariate forecast uncertainty can be derived from the estimation of the unconditional distributions of these uncertainties and applying appropriate copula function. Empirical results have been obtained for Canada and the US. Term structure has been evaluated in the form of unconditional and conditional probabilities of hitting the inflation range of ±1% around the Canadian inflation target. The paper suggests a new measure of inflation forecast uncertainty that accounts for possible inter-country dependence. It is shown that the evaluation of targeting precision can be effectively improved with the use of ex-ante formulated conditional and unconditional probabilities of inflation being within the pre-defined band around the target.

Keywords: macroeconomic forecasting; inflation; uncertainty; non-normality; density forecasting; forecast term structure; copula modelling (search for similar items in EconPapers)
JEL-codes: C53 E37 E52 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.ipe.ro/rjef/rjef1_19/rjef1_2019p5-18.pdf

Related works:
Working Paper: Conditional Term Structure of Inflation Forecast Uncertainty: The Copula Approach (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rjr:romjef:v::y:2019:i:1:p:5-18

Access Statistics for this article

Journal for Economic Forecasting is currently edited by Lucian Liviu Albu and Corina Saman

More articles in Journal for Economic Forecasting from Institute for Economic Forecasting Contact information at EDIRC.
Bibliographic data for series maintained by Corina Saman ( this e-mail address is bad, please contact ).