itself uncertain, and must therefore be estimated. many forecasting institutions convey information about forecast uncertainty by using projection ranges when publishing their forecasts. in practice, a variety of measures of uncertainty can be used to compute these projection ranges : see schumacher c and j breitung ( 2008 ), real - time forecasting of german gdp based on a large factor model with monthly and quarterly data, international journal of forecasting, 24, 368 - 398 ; marcellino m and c schumacher ( 2007 ), factor - midas for now - and forecasting with ragged - edge data : a model comparison for german gdp, deutsche bundesbank discussion paper no 34 / 07. see wang, mc ( 2009 ), comparing the dsge model with the factor model : an out - of - sample forecasting experiment, journal of forecasting 28, 167 - 182. • dispersion of board members ’ point forecasts ( eg federal reserve ), • confidence intervals based on past forecast errors and the judgement of board members ( eg bank of england ) and • dispersion measures derived from past forecast errors, such as the mean of absolute past forecast errors ( eg bundesbank and, until recently, eurosystem staff projections ). the computation of eurosystem staff projection ranges was changed in autumn of last year. instead of deriving them from past forecast errors, these ranges are now based on bayesian vector autoregressions ( bvars ) that account for shock and estimation uncertainty. the ranges are conditional on assumptions on several exogenous variables such as oil prices, exchange rates and foreign demand. in general, model - based projection ranges have two possible advantages over calculating uncertainty based on past errors. if the sample of forecast errors is small, the uncertainty about past forecast uncertainty can be large. moreover, in the case of structural change, past forecast uncertainty can be a misleading measure of future forecast uncertainty. but the structural change can be incorporated into a model from which uncertainty is derived. however, model - based projection ranges also have two major disadvantages. first, the effects of model uncertainty are ignored. second, information not contained in the model variables, which is typically incorporated into the forecast by means of subjective adjustments by the forecaster, is ignored. how to best represent forecast uncertainty is still the subject of intensive discussions in the eurosystem, and a final decision has yet to be taken. furthermore, it should be taken into account that forecast uncertainty

axel a weber : discussion of “ emu and financial integration ” by philip lane and on “ financial integration and risk sharing : the role of the monetary union ” by sebnem kalemli - ozcan et al. comments by professor axel a weber, president of the deutsche bundesbank, at the fifth ecb central banking conference “ the euro at ten : lessons and challenges ”, frankfurt am main, 13 november 2008. * * * introduction the euro at ten can justifiably be called a success story, and increasing financial integration in the euro area is a striking example of this. i am therefore pleased to comment on the two very interesting and insightful papers presented by philip lane and by sebnem kalemliozcan, simone manganelli, elias papaioannou and jose luis peydro. professor pagano has already given some helpful and meaningful comments on the papers. in my comments, i shall first concentrate on philip ’ s reflections on emu and financial integration and add to them some findings for germany. second, i shall discuss some issues raised by sebnem kalemli - ozcan et al. in their paper on the role of the monetary union for financial integration and risk sharing. philip r. lane : “ emu and financial integration ” philip lane : emu and financial integration z provides broadly based evidence that the first 10 years of emu have seen a remarkable increase in financial integration z many barriers to full integration still remain, but initiatives are under way to remove obstacles in the financial infrastructure z the eurosystem is supporting these projects ( sepa, target 2, t2s ) z challenges a number of general predictions about the macroeconomic impact of financial integration on the financial development of euro - area countries, international risk sharing and net capital movements 13 november 2008 comments on papers by p. lane and s. kalemli - ozcan et al. 3 of 10 philip lane ’ s paper builds on his extensive research on emu and financial integration, and presents us with a comprehensive and well structured overview of recent research and market developments. the paper provides broadly based evidence that the first ten years of emu have seen a remarkable increase in financial integration, even if the extent of convergence varies across different sectors. philip notes that there are still many barriers to full integration, but that initiatives, such as sepa, target 2 and t2s should remove some of these obstacles. this is why the eurosystem is actively supporting