Constructing Forecast Confidence Bands During the Financial Crisis

Author/Editor:

Kevin Clinton ; Marianne Johnson ; Huigang Chen ; Ondrej Kamenik ; Douglas Laxton

Publication Date:

September 1, 2009

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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 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.

Series:

Working Paper No. 09/214

Subject:

English

Publication Date:

September 1, 2009

ISBN/ISSN:

9781451873610/1018-5941

Stock No:

WPIEA2009214

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

23

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