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Forecasting and forecast narratives: the Bank of England inflation reports

Clements, M. P. and Reade, J. J. (2019) Forecasting and forecast narratives: the Bank of England inflation reports. International Journal of Forecasting. ISSN 0169-2070 (In Press)

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To link to this item DOI: 10.1016/j.ijforecast.2019.08.013

Abstract/Summary

We analyze the narratives that accompany the numerical forecasts in the Bank of England's Quarterly Inflation Reports, 1997 - 2018. We focus on whether the narratives contain useful information about the future course of key macro variables over and above the point predictions, in terms of whether the narratives can be used to enhance the accuracy of the numerical forecasts. We also consider whether the narratives are able to predict future changes in the numerical forecasts. We find that a measure of sentiment derived from the narratives can predict the errors in the numerical forecasts of output growth, but not of inflation. We find no evidence that past changes in sentiment predict subsequent changes in the point forecasts of output growth or of inflation, but the adjustments to the numerical output growth forecasts have a systematic element.

Item Type:Article
Refereed:Yes
Divisions:Henley Business School > ICMA Centre
Faculty of Arts, Humanities and Social Science > School of Politics, Economics and International Relations > Economics
ID Code:85698
Publisher:Elsevier

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