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Incorporating Judgement in Fan Charts
Author(s) -
Österholm Pär
Publication year - 2009
Publication title -
scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/j.1467-9442.2009.01569.x
Subject(s) - judgement , chart , set (abstract data type) , economics , monetary policy , econometrics , actuarial science , computer science , statistics , macroeconomics , political science , mathematics , law , programming language
Within a decision‐making group, such as a central bank's monetary‐policy committee, group members often hold differing views about the future of key economic variables. Such differences of opinion can be thought of as reflecting differing sets of judgement. This paper suggests modelling each agent's judgement as one scenario in a macroeconomic model. Each judgement set has a specific dynamic impact on the system and, accordingly, a particular predictive density—or fan chart —associated with it. A weighted linear combination of the predictive densities yields a final predictive density that reflects the uncertainty perceived by the agents generating the forecast.