Journal of Risk Model Validation

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The Swedish inflation fan charts: an evaluation of the Riksbank's inflation density forecasts

Kevin Dowd

ABSTRACT

This paper evaluates the inflation density forecasts published by the Swedish central bank, the Sveriges Riksbank. To do so, the paper first recovers the values of the parameters of Riksbank’s forecast density function. Realized inflation outcomes are mapped to their forecasted cumulative density function values, which are then transformed to be standard normal under the null of model adequacy. Model adequacy is then evaluated by tests of standard normality taking account of a possible dependence in the data. Test results indicate that the Riksbank’s forecasts perform fairly well, but deteriorate over a longer horizon.

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