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Central Bank Forecasts as a Coordination Device: Evidence from the Czech Republic

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  • Jan Filáček

    ()
    (Czech National Bank, Monetary and Statistics Department, Prague, Czech Republic)

  • Branislav Saxa

    ()
    (Czech National Bank, Monetary and Statistics Department, Prague, Czech Republic)

Abstract

Do private analysts coordinate their forecasts via central bank forecasts? In this paper, we examine private and central bank forecasts for the Czech Republic. The evolution of the standard deviation of private forecasts as well as the distance from the central bank’s forecasts are used to study whether a coordination effect exists, how it is influenced by uncertainty, and the effects of changes in central bank communication. The results suggest that private analysts coordinate their forecasts for the interest rate and inflation, while no or limited evidence exists for the exchange rate and GDP growth.

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Bibliographic Info

Article provided by Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies in its journal Czech Economic Review.

Volume (Year): 6 (2012)
Issue (Month): 3 (October)
Pages: 244-264

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Handle: RePEc:fau:aucocz:au2012_244

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Keywords: Central bank; forecast; coordination;

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References

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  1. Eijffinger, Sylvester C W & Geraats, Petra M, 2002. "How Transparent are Central Banks?," CEPR Discussion Papers 3188, C.E.P.R. Discussion Papers.
  2. Stephen G. Cecchetti & Craig S. Hakkio, 2010. "Inflation targeting and private sector forecasts," Research Working Paper RWP 10-01, Federal Reserve Bank of Kansas City.
  3. Ehrmann, Michael & Fratzscher, Marcel, 2007. "Social value of public information: testing the limits to transparency," Working Paper Series 0821, European Central Bank.
  4. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
  5. Jiri Bohm & Petr Kral & Branislav Saxa, 2009. "Perception is Always Right: The CNB’s Monetary Policy in the Media," Working Papers 2009/10, Czech National Bank, Research Department.
  6. Eijffinger, Sylvester & Tesfaselassie, Mewael F., 2007. "Central Bank forecasts and disclosure policy: Why it pays to be optimistic," European Journal of Political Economy, Elsevier, vol. 23(1), pages 30-50, March.
  7. Ales Bulir & Katerina Smidkova & Viktor Kotlan & David Navratil, 2007. "Inflation Targeting and Communication: Should the Public Read Inflation Reports or Tea Leaves?," Working Papers 2007/14, Czech National Bank, Research Department.
  8. Frederic S. Mishkin, 2004. "Can Central Bank Transparency Go Too Far?," NBER Working Papers 10829, National Bureau of Economic Research, Inc.
  9. Fujiwara, Ippei, 2005. "Is the central bank's publication of economic forecasts influential?," Economics Letters, Elsevier, vol. 89(3), pages 255-261, December.
  10. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
  11. Ehrmann, Michael & Eijffinger, Sylvester C. W. & Fratzscher, Marcel, 2009. "The role of central bank transparency for guiding private sector forecasts," CEPR Discussion Papers 7585, C.E.P.R. Discussion Papers.
  12. David Navratil & Viktor Kotlan, 2005. "The CNB's Policy Decisions - Are They Priced in by the Markets?," Research and Policy Notes 2005/01, Czech National Bank, Research Department.
  13. Sunil Sharma & Sushil Bikhchandani, 2000. "Herd Behavior in Financial Markets: A Review," IMF Working Papers 00/48, International Monetary Fund.
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Citations

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Cited by:
  1. Robert Ambrisko & Vitezslav Augusta & Jan Babecky & Michal Franta & Dana Hajkova & Petr Kral & Jan Libich & Pavla Netusilova & Milan Rikovsky & Jakub Rysanek & Pavel Soukup & Petr Stehlik & Vilem Vale, 2013. "Macroeconomic Effects of Fiscal Policy," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 2, volume 11, number rb11/2 edited by Jan Babecky & Kamil Galuscak, August.
  2. Roman HORVATH & Pavel KARAS, 2013. "Central Bank Communication and Interest Rates: The Case of the Czech National Bank," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 63(5), pages 454-464, November.
  3. Jaromir Baxa & Michal Franta & Tomas Havranek & Roman Horvath & Miroslav Plasil & Marek Rusnak & Borek Vasicek, 2013. "Transmission of Monetary Policy," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 1, volume 11, number rb11/1 edited by Jan Babecky & Roman Horvath, August.
  4. Kamil Galuscak & Adam Gersl & Marcela Gronychova & Petr Hlavac & Petr Jakubik & Lubos Komarek & Zlatuse Komarkova & Tomas Konecny & Jakub Seidler, 2014. "Stress-Testing Analyses of the Czech Financial System," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 1, volume 12, number rb12/1 edited by Jan Babecky & Roman Horvath, August.
  5. Jose Peydro Alcalde & Sona Benecka & Alexis Derviz & Adam Gersl & Tomas Holub & Roman Horvath & Petr Jakubik & Narcisa Liliana Kadlcakova & Dorota Kowalczyk & Ivana Kubicova & Steven Ongena & Jakub Ry, 2012. "Financial Stability and Monetary Policy," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 2, volume 10, number rb10/2 edited by Jan Babecky & Roman Horvath, August.

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