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Assessing Macroeconomic Forecast Uncertainty: An Application to the Risk of Deflation in Germany

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Borbély, D., Meier, C. Assessing Macroeconomic Forecast Uncertainty: An Application to the Risk of Deflation in Germany. Credit and Capital Markets – Kredit und Kapital, 38(3), 377-399. https://doi.org/10.3790/ccm.38.3.377
Borbély, Dora and Meier, Carsten-Patrick "Assessing Macroeconomic Forecast Uncertainty: An Application to the Risk of Deflation in Germany" Credit and Capital Markets – Kredit und Kapital 38.3, 2005, 377-399. https://doi.org/10.3790/ccm.38.3.377
Borbély, Dora/Meier, Carsten-Patrick (2005): Assessing Macroeconomic Forecast Uncertainty: An Application to the Risk of Deflation in Germany, in: Credit and Capital Markets – Kredit und Kapital, vol. 38, iss. 3, 377-399, [online] https://doi.org/10.3790/ccm.38.3.377

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Assessing Macroeconomic Forecast Uncertainty: An Application to the Risk of Deflation in Germany

Borbély, Dora | Meier, Carsten-Patrick

Credit and Capital Markets – Kredit und Kapital, Vol. 38 (2005), Iss. 3 : pp. 377–399

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Article Details

Author Details

Dora Borbely, Kiel

Carsten-Patrick Meier, Kiel

References

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Abstract

This paper proposes an approach for estimating the uncertainty associated with model-based macroeconomic forecasts. We argue that estimated forecast intervals should account for the uncertainty arising from selecting the specification of an empirical forecasting model from the sample data. To allow this uncertainty to be considered systematically, we formalize a model selection procedure that specifies the lag structure of a model and accounts for aberrant observations. The procedure can be used to bootstrap the complete model selection process when estimating forecast intervals. We apply the procedure to generating forecasts and forecast intervals for the change in the consumer price index in Germany, with special emphasis on assessing the risk of deflationary developments. (JEL C5, E0, E5)