News Release
Bank of England Quarterly Bulletin -
Spring 2005
14 March 2005
The Spring issue of the Bank of England Quarterly Bulletin is published today. Among the articles and reports it contains are:
Dealing with data uncertainty
True values of key economic variables - such as GDP - are unobservable
and can only be estimated. The Office for National Statistics
(ONS) produces official estimates of the variables derived from
comprehensive surveys. However, these can only ever be an approximate
guide to the true underlying economic state. Moreover, there
is an inescapable trade-off between timeliness and accuracy.
This means that early or 'preliminary' ONS estimates will inevitably
be revised as more information is received and processed. A
key question for the Monetary Policy Committee (MPC) is how
best to take account of data uncertainty when assessing economic
conditions.
ONS estimates are not the only source of information on the underlying state of the economy. Policymakers also have access to a wide range of business surveys. These surveys have limitations: for example, they are based on relatively small samples, especially compared with the large annual surveys that the ONS uses to produce its final estimates. But survey data are timely and can be usefully combined with ONS estimates - especially in the early stages of the ONS data cycle. This article sets out a simple methodology for constructing 'best guesses' of the true value of economic variables by combining ONS estimates with business surveys.
Charlie Bean - Executive Director and Chief Economist at the Bank of England - commented, "This 'best guess' methodology is used frequently within the Bank. The recognition of data Cont'd uncertainty by policymakers reflects the inherent difficulty of measuring a large and complex economy in an accurate and timely way. As the article notes, economic assessment is always a matter of judgement".
Indicators of short-term movements in business investment
This article focuses on the uncertainty surrounding business
investment data. As official business investment data are frequently
revised, it can be difficult to draw inferences about underlying
trends in investment using the latest official data alone. Several
survey indicators - for example, from the British Chambers of
Commerce and the CBI - contain information about the path of
investment. The article looks at ways of combining survey indicators
with official data to provide a more accurate guide to underlying
investment trends.
Inside the MPC
This article provides a guide to the workings of the Bank of
England's Monetary Policy Committee (MPC) and is authored by
Richard Lambert, one of the four external MPC members who are
appointed by the Chancellor. Describing the article as "an insider's
view of the MPC at work", Mr Lambert discusses the build-up
to the monthly interest rate meetings, the meetings themselves
and the quarterly forecast round.
Also in the Spring 2005 Bulletin:
- a regular commentary on 'Markets and operations';
- articles 'Divisia money' and 'The role of central banks in payment systems oversight';
- summaries of recent Bank of England working papers and speeches.
Note to Editors
Copies of the Quarterly Bulletin are available from the Publications Group, Bank of England, Threadneedle Street, EC2R 8AH (Tel: 020 7601 4030; fax 020 7601 3298) or from the Quarterly Bulletin pages.
