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Do Central Banks Respond Timely to Developments in the Global Economy?

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  • Hilde C. Bj⊘rnland
  • Leif Anders Thorsrud
  • Sepideh Khayati Zahiri

Abstract

Our analysis suggests; they do not! We arrive at this conclusion by showing that revisions to the published interest rate path projections from the central banks in New Zealand, Norway and Sweden can be predicted by timely and forward‐looking international indicators. Furthermore, using individual country and Panel VARs, identified with an external instrument method, we show that the policy surprises induced by the predictable revisions likely contain information about how the central banks assess past, current and future economic conditions and thereby leads to a positive co‐movement between the interest rate and both financial markets and the macroeconomy.

Suggested Citation

  • Hilde C. Bj⊘rnland & Leif Anders Thorsrud & Sepideh Khayati Zahiri, 2020. "Do Central Banks Respond Timely to Developments in the Global Economy?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 82(2), pages 285-310, April.
    • Handle: RePEc:bla:obuest:v:82:y:2020:i:2:p:285-310
    DOI: 10.1111/obes.12335
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    Cited by:

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    3. Kamber, Güneş & Wong, Benjamin, 2020. "Global factors and trend inflation," Journal of International Economics, Elsevier, vol. 122(C).

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    More about this item

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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