The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support to international institutions.
The Outreach & Education function engages, empowers and educates the public in the Second District. Our outreach mission furthers the Bank’s commitment to the region by listening to the communities we serve and developing programs, analysis and sponsored conferences and clinics to help meet their needs. Our education mission aims to advance public knowledge about the Federal Reserve System and its role in the economy.
We use matched point and density forecasts of output growth and inflation from the ECB Survey of Professional Forecasters to derive measures of forecast uncertainty, forecast dispersion, and forecast accuracy. We construct uncertainty measures from aggregate density functions as well as from individual histograms. The uncertainty measures display countercyclical behavior, and there is evidence of increased uncertainty for output growth and inflation since 2007. The results also indicate that uncertainty displays a very weak relationship with forecast dispersion, corroborating the findings of other recent studies indicating that disagreement is not a valid proxy for uncertainty. In addition, we find no correspondence between movements in uncertainty and predictive accuracy, suggesting that time-varying conditional variance estimates may not provide a reliable proxy for uncertainty. Last, using a regression equation that can be interpreted as a (G)ARCH-M-type model, we find limited evidence of linkages between uncertainty and levels of inflation and output growth.