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The value added of the Bank of Japan's range forecasts

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  • Yoichi Tsuchiya

Abstract

This study investigates whether the Bank of Japan's (BOJ's) interval forecast publications have an added value relative to its point forecast publications by focusing on the range forecasts released by its policy board members. We find that the width of the BOJ's range forecasts has additional information for predicting inflation over point forecasts for the policy decision periods of 12–18 months. The predictive power of the range forecast is robust to the state of the economy, the recently introduced negative interest rate policy, and economic uncertainty measures. Furthermore, both the point and range forecasts influence professional forecasts. Our findings suggest that the source of the central bank's influence is closely related to its information content, not to forecasting accuracy. Therefore, range forecasts are important tools for monetary policy communication.

Suggested Citation

  • Yoichi Tsuchiya, 2021. "The value added of the Bank of Japan's range forecasts," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 40(5), pages 817-833, August.
    • Handle: RePEc:wly:jforec:v:40:y:2021:i:5:p:817-833
    DOI: 10.1002/for.2742
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