RDP 2012-07: Estimates of Uncertainty around the RBA's Forecasts Appendix A: Measures of Uncertainty Presented by Foreign Central Banks

Peter Tulip and Stephanie Wallace

November 2012 – ISSN 1320-7229 (Print), ISSN 1448-5109 (Online)

Institution Measures Method of construction For which variables References
European Central Bank Range with no point estimate Twice the mean absolute error made in the past, with outliers excluded (‘consistent with a 57.5 per cent confidence interval’). Real GDP and its components; Harmonised Index of Consumer Prices ECB (2009, 2011)
US Federal Reserve RMSEs Average of RMSEs for past 20 years of six leading forecasters. Accompanied by a qualitative description of how uncertainty may be unusual. Real GDP growth; unemployment rate; total consumer prices FOMC (2007); Reifschneider and Tulip (2007)
Bank of England 10, 20, 30, … 90 per cent confidence intervals, and more Based on forecast errors over past 10 years, assuming a normal distribution. The dispersion and skewness are then judgementally adjusted. Level and growth of real GDP (including revisions);
CPI		 Bank of England (2011); Elder et al (2005)
Bank of Japan Histograms Average of probability distributions assumed by individual Board members Real GDP growth; CPI excluding fresh food Bank of Japan (2008, 2011)
Bank of Canada 50 and 90 per cent confidence intervals Combination of historical forecast errors and model errors Core CPI;
total CPI		 Bank of Canada (2009, 2011)
Sveriges Riksbank 50, 75 and 90 per cent confidence intervals RMSEs of past forecast errors by Riksbank and implied forward rates (adjusted for risk premia), assuming normality Real GDP growth; CPI; core inflation; repo rate Sveriges Riksbank (2007)
Norges Bank 30, 50, 70 and 90 per cent confidence intervals Macroeconomic model, calibrated to the experience of past 12 years, assuming a normal distribution, constrained by zero lower bound Policy interest rate;
Output gap;
CPI;
core CPI		 Norges Bank (2005, 2011) Alstadheim et al (2010)
Reserve Bank of New Zealand Point estimates only     Reserve Bank of New Zealand (2011)
Peoples Bank of China No quantitative measures. The presentation of the outlook is verbal.   PBOC (2011)