Constructing Fan Charts from the Ragged Edge of SPF Forecasts

Todd Clark, Gergely Ganics and Elmar Mertens

No 22-36, Working Papers from Federal Reserve Bank of Cleveland

Abstract: We develop a model that permits the estimation of a term structure of both expectations and forecast uncertainty for application to professional forecasts such as the Survey of Professional Forecasters (SPF). Our approach exactly replicates a given data set of predictions from the SPF (or a similar forecast source) without measurement error. Our model captures fixed horizon and fixed-event forecasts, and can accommodate changes in the maximal forecast horizon available from the SPF. The model casts a decomposition of multi-period forecast errors into a sequence of forecast updates that may be partially unobserved, resulting in a multivariate unobserved components model. In our empirical analysis, we provide quarterly term structures of expectations and uncertainty bands. Our preferred specification features stochastic volatility in forecast updates, which improves forecast performance and yields model estimates of forecast uncertainty that vary over time. We conclude by constructing SPF-based fan charts for calendar-year forecasts like those published by the Federal Reserve.

Keywords: Term Structure of Expectations; Uncertainty; Survey Forecasts; Fan Charts (search for similar items in EconPapers)
JEL-codes: C53 E37 (search for similar items in EconPapers)
Pages: 53
Date: 2022-11-23
New Economics Papers: this item is included in nep-ecm
Note: Replication files are available at https://github.com/elmarmertens/ClarkGanicsMertensSPFfancharts
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https://doi.org/10.26509/frbc-wp-202236 Full Text (text/html)

Related works:
Working Paper: Constructing fan charts from the ragged edge of SPF forecasts (2024)
Working Paper: Constructing Fan Charts from the Ragged Edge of SPF Forecasts (2024)
Working Paper: Constructing fan charts from the ragged edge of SPF forecasts (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwq:95170

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DOI: 10.26509/frbc-wp-202236

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