국제금융
Scenario Analysis as a Tool for Communicating Risks in Macroeconomic Forecasts
[Main points]
- Illustrating the effects of different macroeconomic policy interventions is perhaps better done using purely empirical methods such as the ‘local projections’ method.
- The best way of illustrating model uncertainty, at least in normal times, is with fan charts based around past forecast errors. Where we are faced, or potentially faced, with a particularly unusual shock, then we can construct a scenario based around a narrative involving this shock using a model with which we could illustrate said narrative.
- This paper examines how scenario analysis can improve the communication of risks in macroeconomic forecasting. Building on the Bernanke review, it evaluates four uses of scenarios:
1. assessing policy interventions
2. illustrating specific forecast risks
3. addressing model uncertainty
4. decomposing historical forecast errors
- It argues that scenarios are most effective when used to convey distinct, narrative-driven risks around a central forecast, offering clearer insights than fan charts alone in this case. However, fan charts are useful for communicating general uncertainty. Overall, the paper finds that narrative-based scenario analysis is a powerful tool for communicating macroeconomic risks.
- Illustrating the effects of different macroeconomic policy interventions is perhaps better done using purely empirical methods such as the ‘local projections’ method.
- The best way of illustrating model uncertainty, at least in normal times, is with fan charts based around past forecast errors. Where we are faced, or potentially faced, with a particularly unusual shock, then we can construct a scenario based around a narrative involving this shock using a model with which we could illustrate said narrative.
- This paper examines how scenario analysis can improve the communication of risks in macroeconomic forecasting. Building on the Bernanke review, it evaluates four uses of scenarios:
1. assessing policy interventions
2. illustrating specific forecast risks
3. addressing model uncertainty
4. decomposing historical forecast errors
- It argues that scenarios are most effective when used to convey distinct, narrative-driven risks around a central forecast, offering clearer insights than fan charts alone in this case. However, fan charts are useful for communicating general uncertainty. Overall, the paper finds that narrative-based scenario analysis is a powerful tool for communicating macroeconomic risks.
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