Tuesday, Aug 10, 2010
'Errors' has to be the understatement of the decade
Telegraph: Bank of England overhauls forecast model after errors
Will their model allow them to curtail inflationary asset booms? No probably not because then it would tell them the wrong thing completely. It is also worth being very skeptical whenever the Bank of England says its going to change the way it calculates something - the last time they did this they created the housing boom by excluding housing from their central inflation target.
Bright sparks these folks, see. That's why they are so good at what they do.
Posted by paul @ 08:30 AM (945 views) Add Comment
5 Comments
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1. refusetobuy said...
This is their current model
https://www.bankofengland.co.uk/publications/other/beqm/beqmfull.pdf
"BEQM describes the behaviour of the UK economy at a relatively aggregated level that is closely related to the incomes and expenditures recorded in the UK National Accounts. To do this, the model contains formal descriptions of the behaviour of private domestic agents, policymakers and the rest of the world, and their interactions in markets for capital and financial assets, goods, and labour."
Looks like its a Dynamic Stochastic General Equilibrium model fitted using a Kalman filter
2. Crunchy said...
Paul, they are very good at what they do. You are just not seeing it from their viewpoint, or is that vantage point.
May I suggest a visit to prisonplanet form time to time, It's not always dominated by Mr Jones.
It would be so much less frustrating for you if you saw it from the other side.
You know, Barry Soetoro's. I mean Barack Obama's side. :)
3. Charlie Brooker said...
Is this overall on the recommendation of their frauditors?
4. charlie brooker said...
Is this overhaul on the recommendation of their frauditors?
5. nod2glod said...
Couldn't a simple, admittedly cynical, but possible accurate model be:
take BoE GDP forcast and divide by 2.
take CPI index multiple by 2.
3.4%/2 = 1.7% GDP for 2011 and 3.8*2 = 7.2% CPI sounds about right.