Monitoring Macroeconomic Prospects with a Meta VAR-E Dashboard

The time series properties of output and price inflation can be accurately captured using VAR-E’s, Vector-Autoregressive models of actual and expected measures of the series where the latter are provided by surveys. The paper proposes a method for estimating VAR-E’s that accommodate individuals’ real-time understanding of the macroeconomy and which deliver forecasts in a way that is useful to decision-makers. It notes the sort of statistics and figures that might be reported in a ‘dashboard’ to monitor the health of the macroeconomy, and this is illustrated using the actual and expected data produced by the Bank of England’s Decision-Maker Panel.