Are Central Banks' Fancharts Reliable? On Calibration of Density Path Forecasts

Are Central Banks' Fancharts Reliable? On Calibration of Density Path Forecasts

Abstract

Central Banks regularly publish fancharts of macroeconomic variables, communicating forecasts for several horizons. Although fancharts contains three types of information: point forecasts (the path), likelihood of the path (bands around it), and variable’s dynamics across horizons; the latter is neglected by existing absolute evaluation approaches. Practitioners indeed evaluate the calibration of fancharts testing the forecast accuracy horizon by horizon, not considering any time-dependency among them. This paper describes fancharts as density path forecasts, discusses the impact of time-dependence in evaluation and proposes calibration tests to assess whether or not Central Banks publishes reliable forecasts.

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Giulia Mantoan
Research Economist