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Abstract

Monetary policy in the euro area is conducted within a multi-country, multi-cultural, and multi-lingual context. How does this heterogeneity affect the ability of economic agents to understand and to anticipate monetary policy by the European Central Bank (ECB)? Using a database of surveys of professional ECB policy forecasters in 24 countries, we find remarkable differences in forecast accuracy, and show that these have important repercussions on market behaviour. Explaining the differences in forecast accuracy, we provide evidence that they are partly related to geography and clustering around informational hubs, as well as to country-specific economic conditions. In large part this heterogeneity can be traced to differences in forecasting models.

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File URL: http://www.sciencedirect.com/science/article/B6V64-4V47CHP-1/2/626602b00d856aa6849a44d504da5859
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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 53 (2009)
Issue (Month): 8 (November)
Pages: 1028-1041

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Handle: RePEc:eee:eecrev:v:53:y:2009:i:8:p:1028-1041

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Web page: http://www.elsevier.com/locate/eer

Related research

Keywords: Monetary policy ECB Forecast Geography Heterogeneity Taylor rule Survey data;

References

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Cited by:

1. Hefeker, Carsten & Zimmer, Blandine, 2011. "The optimal choice of central bank independence and conservatism under uncertainty," Journal of Macroeconomics, Elsevier, vol. 33(4), pages 595-606.
2. Carsten Hefeker & Blandine Zimmer, 2010. "Central bank independence and conservatism under uncertainty: Substitutes or complements?," MAGKS Papers on Economics 201001, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
   
   • Carsten Hefeker & Blandine Zimmer, 2010. "Central bank independence and conservatism under uncertainty: Substitutes or complements?," Volkswirtschaftliche Diskussionsbeiträge 140-10, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
   • Carsten Hefeker & Blandine Zimmer, 2011. "Central Bank Independence and Conservatism under Uncertainty: Substitutes or Complements?," CESifo Working Paper Series 3344, CESifo Group Munich.
3. Berger, Helge & Ehrmann, Michael & Fratzscher, Marcel, 2011. "Geography, skills or both: What explains Fed watchers' forecast accuracy of US monetary policy?," Journal of Macroeconomics, Elsevier, vol. 33(3), pages 420-437, September.
4. Jef Boeckx, 2011. "Estimating monetary policy reaction functions : A discrete choice approach," Working Paper Research 210, National Bank of Belgium.

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