Appendix D: Comparisons with Errors from Null Alternatives | RDP 2012-07: Estimates of Uncertainty around the RBA's Forecasts

RDP 2012-07: Estimates of Uncertainty around the RBA's Forecasts Appendix D: Comparisons with Errors from Null Alternatives

Peter Tulip and Stephanie Wallace

November 2012 – ISSN 1320-7229 (Print), ISSN 1448-5109 (Online)

Table D1: Underlying Inflation Forecast RMSEs – RBA and Random Walk
4-quarter change; 1993:Q1–2011:Q4
Horizon	RMSE			Significance	R²
(quarters ahead)	RBA	Random walk	Ratio	p-value
0	0.20	0.28	0.72	.01	0.48
1	0.32	0.45	0.70	.01	0.51
2	0.42	0.60	0.69	.00	0.52
3	0.54	0.73	0.74	.02	0.46
4	0.61	0.80	0.76	.04	0.42
5	0.69	0.86	0.80	.10	0.36
6	0.73	0.94	0.78	.12	0.39
7	0.80	1.08	0.74	.15	0.46
8	0.75	1.23	0.61	.08	0.63

Table D2: Underlying Inflation Forecast RMSEs – RBA and Target Midpoint
4-quarter change; 1993:Q1–2011:Q4
Horizon	RMSE			Significance	R²
(quarters ahead)	RBA	Target midpoint	Ratio	p-value
0	0.20	0.67	0.30	.03	0.91
1	0.32	0.69	0.46	.05	0.79
2	0.42	0.71	0.59	.06	0.65
3	0.54	0.74	0.72	.06	0.48
4	0.61	0.77	0.79	.07	0.38
5	0.69	0.77	0.88	.29	0.22
6	0.73	0.81	0.91	.41	0.18
7	0.80	0.78	1.03	.87	−0.05
8	0.75	0.50	1.49	.08	−1.22

Table D3: CPI Inflation Forecast RMSEs – RBA and Random Walk
4-quarter change; 1993:Q1–2011:Q4
Horizon	RMSE			Significance	R²
(quarters ahead)	RBA	Random walk	Ratio	p-value
0	0.26	0.79	0.32	.00	0.89
1	0.48	1.24	0.39	.00	0.85
2	0.71	1.62	0.44	.00	0.81
3	0.89	1.90	0.47	.00	0.78
4	1.08	2.02	0.53	.00	0.71
5	1.20	2.09	0.57	.01	0.67
6	1.20	2.06	0.58	.02	0.66
7	1.27	2.19	0.58	.03	0.67
8	1.30	2.47	0.53	.03	0.72

Table D4: CPI Inflation Forecast RMSEs – RBA and Target Midpoint
4-quarter change; 1993:Q1–2011:Q4
Horizon	RMSE			Significance	R²
(quarters ahead)	RBA	Target midpoint	Ratio	p-value
0	0.26	1.39	0.19	.00	0.97
1	0.48	1.39	0.35	.00	0.88
2	0.71	1.39	0.51	.01	0.74
3	0.89	1.41	0.63	.04	0.60
4	1.08	1.42	0.76	.15	0.42
5	1.20	1.41	0.85	.38	0.27
6	1.20	1.39	0.87	.48	0.25
7	1.27	1.36	0.93	.78	0.13
8	1.30	1.40	0.93	.83	0.13

Table D5: GDP Growth Forecast RMSEs – RBA and Historical Mean
4-quarter change; 1993:Q1–2011:Q4
Horizon	RMSE			Significance	R²
(quarters ahead)	RBA	Historical mean	Ratio	p-value
0	0.79	1.25	0.63	.00	0.61
1	1.12	1.26	0.89	.27	0.21
2	1.30	1.27	1.02	.86	−0.04
3	1.44	1.28	1.13	.23	−0.28
4	1.40	1.26	1.11	.18	−0.23
5	1.32	1.26	1.05	.41	−0.10
6	1.36	1.32	1.03	.59	−0.06
7	1.39	1.39	1.00	.94	−0.01
8	1.4	1.51	0.92	.12	0.15

Table D6: Unemployment Rate Forecast RMSEs – RBA and Random Walk
1993:Q1–2011:Q4
Horizon	RMSE			Significance	R²
(quarters ahead)	RBA	Random walk	Ratio	p-value
0	0.17	0.24	0.71	.03	0.50
1	0.33	0.4	0.82	.18	0.32
2	0.49	0.55	0.9	.46	0.20
3	0.62	0.67	0.92	.63	0.15
4	0.76	0.78	0.98	.89	0.05
5	0.85	0.85	1.00	1.0	0.00
6	0.91	60.910	1.02	.92	−0.03
7	0.97	0.89	1.10	.69	−0.20
8	1.16	0.94	1.24	.53	−0.53