Bayesian fan charts for U.K. inflation: forecasting and sources of uncertainty in an evolving monetary system

We estimate a Bayesian vector autoregression for the U.K. with drifting coefficients and stochastic volatilities. We use it to characterize posterior densities for several objects that are useful for designing and evaluating monetary policy, including local approximations to the mean, persistence, and volatility of inflation. We present diverse sources of uncertainty that impinge on the posterior predictive density for inflation, including model uncertainty, policy drift, structural shifts and other shocks. We use a recently developed minimum entropy method to bring outside information to bear on inflation forecasts. We compare our predictive densities with the Bank of England's fan charts

An Examination of the Robustness to Non Normality of the EWMA Control Charts for the Dispersion

The EWMA control chart is used to detect small shifts in a process. It has been shown that, for certain values of the smoothing parameter, the EWMA chart for the mean is robust to non normality. In this article, we examine the case of non normality in the EWMA charts for the dispersion. It is shown that we can have an EWMA chart for dispersion robust to non normality when non normality is not extreme.Average run length, Control charts, Exponntially weighted moving average control chart, Median run length, Non normality, Statistical process control

One-sided Downward Control Chart for Monitoring the Multivariate Coefficient of Variation with VSSI Strategy

In recent years, control charts monitoring the coefficient of variation (CV), denoted as the ratio of the variance to the mean, is attracting significant attention due to its ability to monitor processes in which the process mean and process variance are not independent of each other. However, very few studies have been done on charts to monitor downward process shifts, which is important since downward process shifts show process improvement. In view of the importance of today's competitive manufacturing environment, this paper proposes a one-sided chart to monitor the downward multivariate CV (MCV) with variable sample size and sampling interval (VSSI), i.e. the VSSID MCV chart. This paper monitors the MCV as most industrial processes simultaneously monitor at least two or more quality characteristics, while the VSSI feature is incorporated, as it is shown that this feature brings about a significant improvement of the chart. A Markov chain approach was adopted for designing a performance measure of the proposed chart. The numerical comparison revealed that the proposed chart outperformed existing MCV charts. The implementation of the VSSID MCV chart is illustrated with an example

Analysis and Design of One- and Two-Sided Cusum Charts with Known and Estimated Parameters

The integral equation and Markov chain methods for analyzing the performances of one- and two-sided CUSUM X charts with known and estimated in-control process parameters are studied. Some new integral equations for analyzing the two-sided CUSUM X are derived. These methods provide us with ways to approximate the run length distribution of the chart. Since parameters of the run length distribution are commonly used measures of the performance of a control chart, it is important to choose an accurate approximation method. We develop some new Markov chain approximations using methods similar to the methods for approximating a solution to integral equations that describe the run length distribution

Economic Design of X-bar Control Chart Using Gravitational Search Algorithm

Control chart is a major and one of most widely used statistical process control (SPC) tools. It is used to statistically monitor the process through sampling inspection. Control chart tells us when to allow the process to continue or avoid unnecessary adjustments with machine and when to take the corrective action. On to same problem either on the material side or from the operator side it is quite possible that either targeted value X-bar has changed or process dispersion has changed. These changes must be reflected on the control chart so that the corrective action can be taken. The use of control chart requires selection of three parameters namely sample size n, sampling interval h, and width of control limits k for the chart. Duncan developed a loss cost function for X-bar control chart with single assignable cause. The function has to be optimized using metaheuristic optimization technique. In the present project, the economic design of the X-bar control chart using Gravitational Search Algorithm (GSA) has been developed MATLAB software to determine the three parameters i.e. n , h and k such that the expected total cost per hour is minimized. The results obtained are found to be better than that reported in literature

Economic Design of X-bar Control Chart Using Gravitational Search Algorithm

Control chart is a major and one of most widely used statistical process control (SPC) tools. It is used to statistically monitor the process through sampling inspection. Control chart tells us when to allow the process to continue or avoid unnecessary adjustments with machine and when to take the corrective action. On to same problem either on the material side or from the operator side it is quite possible that either targeted value X-bar has changed or process dispersion has changed. These changes must be reflected on the control chart so that the corrective action can be taken. The use of control chart requires selection of three parameters namely sample size n, sampling interval h, and width of control limits k for the chart. Duncan developed a loss cost function for X-bar control chart with single assignable cause. The function has to be optimized using metaheuristic optimization technique. In the present project, the economic design of the X-bar control chart using Gravitational Search Algorithm (GSA) has been developed MATLAB software to determine the three parameters i.e. n , h and k such that the expected total cost per hour is minimized. The results obtained are found to be better than that reported in literature

Unit Interval Time and Magnitude Monitoring Using Beta and Unit Gamma Distributions

Quick detection of an assignable cause is necessary for process accuracy with respect to the specifications. The aim of this study is to monitor the time and magnitude processes based on unit-interval data. To this end, maximum exponentially weighted moving average (Max-EWMA) control chart for simultaneous monitoring time and magnitude of an event is proposed. To be precise, beta and unit gamma distributions are considered to develop the Max-EWMA chart. The chart’s performance is accessed using average run length (ARL), the standard deviation of run length (SDRL), and different quantiles of the run length distribution through extensive Monte Carlo simulations. Besides a comprehensive simulation study, the proposed charting methodology is applied to a real data set. The results show that the proposed chart is more efficient in detecting small to medium-sized shifts. The results also indicate that simultaneous shifts are detected more quickly as compared to the pure shift

(Un)naturally low? Sequential Monte Carlo tracking of the US natural interest rate

Following the 2000 stockmarket crash, have US interest rates been held "too low" in relation to their natural level? Most likely, yes. Using a structural neo-Keynesian model, this paper attempts a real-time evaluation of the US monetary policy stance while ensuring consistency between the specification of price adjustments and the evolution of the econ- omy under flexible prices. To do this, the model's likelihood function is evaluated using a Sequential Monte Carlo algorithm providing inference about the time-varying distribution of structural parameters and unobservable, nonstationary state variables. Tracking down the evolution of underlying stochastic processes in real time is found crucial (i) to explain postwar Fed's policy and (ii) to replicate salient features of the data. JEL Classification: E43, C11, C15Bayesian Analysis, DSGE Models, Natural Interest Rate, Particle Filters