Using bank supervisory data to improve macroeconomic forecasts
AbstractLocating the function of bank supervision in the central bank has been a contentious issue, both domestically and internationally. Most discussions of the role of bank supervision in central banking have focused on crisis management and the responsibilities of the central bank as a lender of last resort. However, recent research by the authors has shown that confidential supervisory information garnered through bank examinations potentially can improve the forecasts of key macroeconomic variables and thus the conduct of monetary policy. Forecasting macroeconomic variables is essential to the conduct of monetary policy, since the long lags in the effect of monetary policy ensure that changes in monetary policy today alter the economy only in the future. This article explores further the robustness of the results reported earlier. It examines the pattern of the forecast errors of the individual private forecasters studied, and confirms the earlier results. Thus, the article concludes that an important reason for central banks to have access to confidential supervisory information, and possibly to participate in its collection, is that such information can improve macroeconomic forecasts and in this way improve monetary policy decision-making.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Federal Reserve Bank of Boston in its journal New England Economic Review.
Volume (Year): (1999)
Issue (Month): Sep ()
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Joe Peek & Eric Rosengren, 1993.
"Bank regulation and the credit crunch,"
93-2, Federal Reserve Bank of Boston.
- Jeremy C. Stein, 1998.
"An Adverse-Selection Model of Bank Asset and Liability Management with Implications for the Transmission of Monetary Policy,"
RAND Journal of Economics,
The RAND Corporation, vol. 29(3), pages 466-486, Autumn.
- Jeremy C. Stein, 1995. "An Adverse Selection Model of Bank Asset and Liability Management with Implications for the Transmission of Monetary Policy," NBER Working Papers 5217, National Bureau of Economic Research, Inc.
- Stephen K. McNees, 1992. "How large are economic forecast errors?," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 25-42.
- Allen N. Berger & Sally M. Davies, 1994. "The information content of bank examinations," Proceedings 55, Federal Reserve Bank of Chicago.
- Ben S. Bernanke, 1983.
"Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression,"
NBER Working Papers
1054, National Bureau of Economic Research, Inc.
- Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-76, June.
- Kashyap, Anil K. & Stein, Jeremy C., 1995.
"The impact of monetary policy on bank balance sheets,"
Carnegie-Rochester Conference Series on Public Policy,
Elsevier, vol. 42(1), pages 151-195, June.
- Anil K Kashyap & Jeremy C. Stein, 1994. "The Impact of Monetary Policy on Bank Balance Sheets," NBER Working Papers 4821, National Bureau of Economic Research, Inc.
- Stock, J.H. & Watson, M.W., 1989.
"New Indexes Of Coincident And Leading Economic Indicators,"
178d, Harvard - J.F. Kennedy School of Government.
- James H. Stock & Mark W. Watson, 1989. "New Indexes of Coincident and Leading Economic Indicators," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 351-409 National Bureau of Economic Research, Inc.
- Allen Berger & Sally Davies, 1994.
"The Information Content of Bank Examinations,"
Center for Financial Institutions Working Papers
94-24, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-67, March.
- Robert DeYoung & Mark J. Flannery & William W. Lang & Sorin M. Sorescu, 1998. "The informational advantage of specialized monitors: the case of bank examiners," Working Paper Series WP-98-4, Federal Reserve Bank of Chicago.
- Hansen, Lars Peter & Hodrick, Robert J, 1980. "Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 829-53, October.
- Joe Peek & Eric S. Rosengren & Geoffrey M. B. Tootell, 1999.
"Is bank supervision central to central banking?,"
99-7, Federal Reserve Bank of Boston.
- Keane, Michael P & Runkle, David E, 1990. "Testing the Rationality of Price Forecasts: New Evidence from Panel Data," American Economic Review, American Economic Association, vol. 80(4), pages 714-35, September.
- Diana Hancock & James A. Wilcox, 1992. "The effect on bank assets of business conditions and capital shortfalls," Proceedings 373, Federal Reserve Bank of Chicago.
- Friedman, Benjamin M & Kuttner, Kenneth N, 1992. "Money, Income, Prices, and Interest Rates," American Economic Review, American Economic Association, vol. 82(3), pages 472-92, June.
- 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.
- Péter Gábriel & Klára Pintér, 2006. "The effect of the MNB’s communication on financial markets," MNB Working Papers 2006/9, Magyar Nemzeti Bank (the central bank of Hungary).
- Marco Hoeberichts, 2002.
"The Credibility of Central Bank Announcements,"
Banco de Espaï¿½a Working Papers
0221, Banco de Espa�a.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Catherine Spozio).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.