Title: A measure of ex-ante inflation uncertainty based on density forecast revisions
Authors: Carlos Diaz - University of Leicester (United Kingdom) [presenting]
Abstract: A new measure of ex-ante inflation uncertainty is derived from UK inflation density forecasts. Based on the revision of these forecasts the density of the shocks of information perceived by the Bank between two consecutive releases is obtained. The variance of these shocks can be interpreted as a measure of the uncertainty that the Bank expects to affect inflation in the following quarter due to information obtained in the previous one. The results show that inflation uncertainty was decreasing during the period leading to the financial crisis, increasing sharply during the period 2007-2011, and remaining stable after that but at levels higher than its pre-crisis values. A similar exercise is done with the GDP growth density forecasts and the uncertainty spillovers between both variables are investigated.