RDP 2012-07: Estimates of Uncertainty around the RBA's Forecasts Appendix D: Comparisons with Errors from Null Alternatives

Peter Tulip and Stephanie Wallace

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

Table D1: Underlying Inflation Forecast RMSEs – RBA and Random Walk
4-quarter change; 1993:Q1–2011:Q4
Horizon RMSE Significance R2
(quarters ahead) RBA Random walk Ratio p-value
0 0.20 0.28 0.72 .01 0.48
1 0.32 0.45 0.70 .01 0.51
2 0.42 0.60 0.69 .00 0.52
3 0.54 0.73 0.74 .02 0.46
4 0.61 0.80 0.76 .04 0.42
5 0.69 0.86 0.80 .10 0.36
6 0.73 0.94 0.78 .12 0.39
7 0.80 1.08 0.74 .15 0.46
8 0.75 1.23 0.61 .08 0.63
Table D2: Underlying Inflation Forecast RMSEs – RBA and Target Midpoint
4-quarter change; 1993:Q1–2011:Q4
Horizon RMSE Significance R2
(quarters ahead) RBA Target midpoint Ratio p-value
0 0.20 0.67 0.30 .03 0.91
1 0.32 0.69 0.46 .05 0.79
2 0.42 0.71 0.59 .06 0.65
3 0.54 0.74 0.72 .06 0.48
4 0.61 0.77 0.79 .07 0.38
5 0.69 0.77 0.88 .29 0.22
6 0.73 0.81 0.91 .41 0.18
7 0.80 0.78 1.03 .87 −0.05
8 0.75 0.50 1.49 .08 −1.22
Table D3: CPI Inflation Forecast RMSEs – RBA and Random Walk
4-quarter change; 1993:Q1–2011:Q4
Horizon RMSE Significance R2
(quarters ahead) RBA Random walk Ratio p-value
0 0.26 0.79 0.32 .00 0.89
1 0.48 1.24 0.39 .00 0.85
2 0.71 1.62 0.44 .00 0.81
3 0.89 1.90 0.47 .00 0.78
4 1.08 2.02 0.53 .00 0.71
5 1.20 2.09 0.57 .01 0.67
6 1.20 2.06 0.58 .02 0.66
7 1.27 2.19 0.58 .03 0.67
8 1.30 2.47 0.53 .03 0.72
Table D4: CPI Inflation Forecast RMSEs – RBA and Target Midpoint
4-quarter change; 1993:Q1–2011:Q4
Horizon RMSE Significance R2
(quarters ahead) RBA Target midpoint Ratio p-value
0 0.26 1.39 0.19 .00 0.97
1 0.48 1.39 0.35 .00 0.88
2 0.71 1.39 0.51 .01 0.74
3 0.89 1.41 0.63 .04 0.60
4 1.08 1.42 0.76 .15 0.42
5 1.20 1.41 0.85 .38 0.27
6 1.20 1.39 0.87 .48 0.25
7 1.27 1.36 0.93 .78 0.13
8 1.30 1.40 0.93 .83 0.13
Table D5: GDP Growth Forecast RMSEs – RBA and Historical Mean
4-quarter change; 1993:Q1–2011:Q4
Horizon RMSE Significance R2
(quarters ahead) RBA Historical mean Ratio p-value
0 0.79 1.25 0.63 .00 0.61
1 1.12 1.26 0.89 .27 0.21
2 1.30 1.27 1.02 .86 −0.04
3 1.44 1.28 1.13 .23 −0.28
4 1.40 1.26 1.11 .18 −0.23
5 1.32 1.26 1.05 .41 −0.10
6 1.36 1.32 1.03 .59 −0.06
7 1.39 1.39 1.00 .94 −0.01
8 1.4 1.51 0.92 .12 0.15
Table D6: Unemployment Rate Forecast RMSEs – RBA and Random Walk
1993:Q1–2011:Q4
Horizon RMSE Significance R2
(quarters ahead) RBA Random walk Ratio p-value
0 0.17 0.24 0.71 .03 0.50
1 0.33 0.4 0.82 .18 0.32
2 0.49 0.55 0.9 .46 0.20
3 0.62 0.67 0.92 .63 0.15
4 0.76 0.78 0.98 .89 0.05
5 0.85 0.85 1.00 1.0 0.00
6 0.91 60.910 1.02 .92 −0.03
7 0.97 0.89 1.10 .69 −0.20
8 1.16 0.94 1.24 .53 −0.53