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Macroeconomic Forecast Relevance in the Central Banks Decisions. The Case of European Economies

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  • Magdalena Szyszko
  • Aleksandra Rutkowska

Abstract

We examine central banks' involvement in inflation forecast targeting by means of an index-based analysis and ordered logistic regression. The research encompasses the Bank of England, the Czech National Bank, the National Bank of Poland and the Sveriges Riksbank. They produce conditional or unconditional macroeconomic forecasts. Hence, two paths have been used to examine them. We examine whether the four central banks follow their forecasts to some extent. We have found that the CNB and SR are highly consistent in terms of compatibility of their decisions with the forecasts, timing of decisions, and communication by means of forecasts. The NBP follows its forecast much less consistently, while the BoE ignores it altogether. As some of the results for the BoE and NBP are unambiguous, we remain cautious while interpreting them. This paper contributes to the literature on the empirical evaluation of inflation forecast targeting.

Suggested Citation

  • Magdalena Szyszko & Aleksandra Rutkowska, 2019. "Macroeconomic Forecast Relevance in the Central Banks Decisions. The Case of European Economies," Prague Economic Papers, Prague University of Economics and Business, vol. 2019(3), pages 257-275.
    • Handle: RePEc:prg:jnlpep:v:2019:y:2019:i:3:id:711:p:257-275
    DOI: 10.18267/j.pep.711
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    3. Josef Arlt & Martin Mandel, 2014. "The Reaction Function of Three Central Banks of Visegrad Group," Prague Economic Papers, Prague University of Economics and Business, vol. 2014(3), pages 269-289.
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    More about this item

    Keywords

    inflation forecast targeting; macroeconomic forecasts; central bank decision rules;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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