'Censored Density Forecasts: Production and Evaluation'


‘Censored Density Forecasts: Production and Evaluation’


Thursday 25 March 2021, 11:30 — 12:30


Presented by: James Mitchell (Federal Reserve Bank of Cleveland and ESCoE)

This talk develops methods for the production and evaluation of censored density forecasts. Censored density forecasts quantify forecast risks in a middle region of the density covering a specified probability, but ignore the magnitude but not the frequency of outlying observations. A new estimator is proposed that fits a potentially skewed and fat tailed density to the inner observations, acknowledging that the outlying observations may be drawn from a different but unknown distribution. An application using historical forecast errors from the Federal Reserve Board and the Monetary Policy Committee at the Bank of England illustrates the utility of censored density forecasts when quantifying forecast risks after shocks such as the global financial crisis and the COVID-19 pandemic.

Video recording