BoE paper lays out ‘financial conditions index’ for UK
Index proves valuable as summary measure and also as input to forecasting
Research published by the Bank of England sets out two methods of building a “financial conditions index” for the UK. The authors find the resulting indexes are useful as an input to forecasting.
In the staff working paper, George Kapetanios, Simon Price and Garry Young design two FCIs for the UK, one based on a “hitherto untried method” known as multivariate partial least squares, and another on the more common approach of principal component analysis.
They find their FCIs are useful as
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