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Constructing Forecast Confidence Bands During the Financial Crisis
- Author / Creator
- Available as
- Online
- Summary
-
We derive forecast confidence bands using a Global Projection Model covering the United States, the euro area, and Japan. In the model, the price of oil is a stochastic process, interest rates have...
We derive forecast confidence bands using a Global Projection Model covering the United States, the euro area, and Japan. In the model, the price of oil is a stochastic process, interest rates have a zero floor, and bank lending tightening affects the United States. To calculate confidence intervals that respect the zero interest rate floor, we employ Latin hypercube sampling. Derived confidence bands suggest non-negligible risks that U.S. interest rates might stay near zero for an extended period, and that severe credit conditions might persist.
Details
- Creator
- Kevin Clinton, Marianne Johnson, Huigang Chen, Ondrej Kamenik, Douglas Laxton
- Format
- Books
- Language
- English
- Contributors
- Publication
-
- 1st ed
- Washington, D.C. : International Monetary Fund, 2009
- Physical Details
-
- 23 p. : ill
- ISBNs
- 1462375944, 1282844202, 1452728879, 1451873611, 9786612844201, 145191783X
- OCLC
- ocn694140988
- "September 2009."
- English
- Intro -- Contents -- I. Introduction -- II. Model Structure -- 2.1 Overview -- 2.2 Model components -- 2.2.1 Variable definitions -- 2.2.2 Underlying equilibrium values and stochastic processes -- 2.2.3 Bank lending tightening -- 2.2.4 Output gap -- 2.2.5 Unemployment -- 2.2.6 Inflation -- 2.2.7 Policy rule for the interest rate -- 2.2.8 Exchange rate -- 2.2.9 Variance and coviariance of disturbances -- III. GPM-Generated Confidence Bands -- 3.1 Construction -- 3.2 U.S. inflation -- 3.3 U.S. interest rate -- 3.4 U.S. output gap -- 3.5 Bank lending tightening -- IV. Conclusions -- References -- Figures -- 1. U.S. Year-on Year CPI Inflation -- 2. U.S. Interest Rate -- 3. U.S. Output Gap -- 4. Bank Lending Tightening -- 5. Oil Price
Subjects
- Global Financial Crisis, 2008-2009.
- Financial crises -- United States -- Econometric models.
- Financial crises -- European Union countries -- Econometric models.
- Financial crises -- Japan -- Econometric models.
- Petroleum products -- Prices -- United States -- Econometric models.
- Petroleum products -- Prices -- European Union countries -- Econometric models.
- Petroleum products -- Prices -- Japan -- Econometric models.
- Interest rates -- United States -- Econometric models.
- Interest rates -- European Union countries -- Econometric models.
- Interest rates -- Japan -- Econometric models.
- Bank loans -- United States -- Econometric models.
- Bank loans -- European Union countries -- Econometric models.
- Bank loans -- Japan -- Econometric models.