How Informative Are Central Bank Assessments of Macroeconomic Risks?
by Malte Knüppel and Guido Schultefrankenfeld
Many central banks publish regular assessments of the magnitude
and balance of risks to the macroeconomic outlook. In
this paper, we analyze the statistical properties of the inflation
risk assessments that have been published by the Bank of
England and the Sveriges Riksbank. In each case, we find no
significant evidence of any systematic connection between the
ex ante risk assessments and the ex post forecast errors at horizons
from zero to eight quarters. These results illustrate the
difficult challenges in making accurate real-time assessments
of temporal changes to the distribution of forecast errors.
JEL Codes: E37, C12, C53.
(PDF, 53 pages 555 kb)