By Alastair Cunningham and Christopher Jeffery of the Bank's Conjunctural Assessment and Projections Division.
Most macroeconomic data are uncertain - they are estimates rather than perfect measures. One symptom of that uncertainty is the propensity of statistical agencies to revise their estimates in light of new information or methodological advances. While revisions should move estimates closer to the 'truth', the potential for early estimates to be revised poses challenges for forecasting and economic analysis. Over the past few years, Bank staff have undertaken a range of research into how best to deal with the ensuing uncertainty. The results of that research have been used for some time as part of the toolkit available to staff when briefing the Monetary Policy Committee. This article describes some further developments in that research effort aimed at refining the staff's toolkit.
Extracting a better signal from uncertain data