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Forecasting inflation and growth: do private forecasts match those of policymakers?

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Author Info

  • William T. Gavin
  • Rachel J. Mandal

Abstract

FOMC projections are important because they provide information for evaluating current monetary policy intentions and because they indicate what FOMC members think will be the likely consequence of their policies. Results here show that the Blue Chip consensus forecasts are a good proxy for the FOMC views. For example, they match the policymakers' views as closely as do the Board staff forecasts presented at FOMC meetings. Using alternative forms of the Taylor Rule, we show that the Blue Chip consensus and the Fed Policymakers' forecasts have almost identical implications for the monetary policy process.

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Bibliographic Info

Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2000-026.

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Date of creation: 2000
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Publication status: Published in Business Economics, January 2001, 36(1), pp. 13-20
Handle: RePEc:fip:fedlwp:2000-026

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Keywords: Monetary policy ; Forecasting ; Federal Open Market Committee;

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References

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  1. Julio J. Rotemberg & Michael Woodford, 1998. "Interest-Rate Rules in an Estimated Sticky Price Model," NBER Working Papers 6618, National Bureau of Economic Research, Inc.
  2. Lars E.O. Svensson & Michael Woodford, 2000. "Indicator variables for optimal policy," Proceedings, Federal Reserve Bank of San Francisco.
  3. Athanasios Orphanides, 2001. "Monetary Policy Rules Based on Real-Time Data," American Economic Review, American Economic Association, vol. 91(4), pages 964-985, September.
  4. Michael Woodford, 2000. "Pitfalls of Forward-Looking Monetary Policy," American Economic Review, American Economic Association, vol. 90(2), pages 100-104, May.
  5. Svensson, L-E-O, 1996. "Inflation Forecast Targeting : Implementaing and Monitoring Inflation Targets," Papers 615, Stockholm - International Economic Studies.
  6. Croushore, Dean & Stark, Tom, 2001. "A real-time data set for macroeconomists," Journal of Econometrics, Elsevier, vol. 105(1), pages 111-130, November.
  7. Sharon Kozicki, 1999. "How useful are Taylor rules for monetary policy?," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 5-33.
  8. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
  9. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," CEPR Discussion Papers 2139, C.E.P.R. Discussion Papers.
  10. Bennett T. McCallum, 1999. "Recent developments in the analysis of monetary policy rules," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 3-12.
  11. Bernanke, Ben S & Woodford, Michael, 1997. "Inflation Forecasts and Monetary Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(4), pages 653-84, November.
  12. David H. Romer & Christina D. Romer, 2000. "Federal Reserve Information and the Behavior of Interest Rates," American Economic Review, American Economic Association, vol. 90(3), pages 429-457, June.
  13. Michael Dotsey & Brian Scholl, 2000. "Behavior of the real rate of interest over the business cycle," Working Paper 00-09, Federal Reserve Bank of Richmond.
  14. Chari, V V, 1997. "Comment on "Inflation Forecasts and Monetary Policy."," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(4), pages 685-86, November.
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Citations

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Cited by:
  1. Tito Nícias Teixeira da Silva Filho, 2013. "Banks, Asset Management or Consultancies' Inflation Forecasts: is there a better forecaster out there?," Working Papers Series 310, Central Bank of Brazil, Research Department.
  2. Capistrán, Carlos, 2008. "Bias in Federal Reserve inflation forecasts: Is the Federal Reserve irrational or just cautious?," Journal of Monetary Economics, Elsevier, vol. 55(8), pages 1415-1427, November.
  3. Travaglini, Guido, 2007. "The U.S. Dynamic Taylor Rule With Multiple Breaks, 1984-2001," MPRA Paper 3419, University Library of Munich, Germany, revised 15 Jun 2007.
  4. Kishor N. Kundan, 2010. "The Superiority of Greenbook Forecasts and the Role of Recessions," National Bank of Poland Working Papers 74, National Bank of Poland, Economic Institute.
  5. Paul Hubert, 2011. "Do central banks forecast influence private agents ? Forecasting performance vs. signals," Documents de Travail de l'OFCE 2011-20, Observatoire Francais des Conjonctures Economiques (OFCE).
  6. Paul Hubert, 2009. "An Empirical Review of Federal Reserve’s Informational Advantage," Documents de Travail de l'OFCE 2009-03, Observatoire Francais des Conjonctures Economiques (OFCE).
  7. Hamid Baghestani, 2009. "A Comparison of U.S. Housing Starts Forecasts," Economics Bulletin, AccessEcon, vol. 29(4), pages 2525-2530.
  8. Gavin, William T. & Mandal, Rachel J., 2003. "Evaluating FOMC forecasts," International Journal of Forecasting, Elsevier, vol. 19(4), pages 655-667.
  9. Baghestani, Hamid & Khallaf, Ashraf, 2012. "Predictions of growth in U.S. corporate profits: Asymmetric vs. symmetric loss," International Review of Economics & Finance, Elsevier, vol. 22(1), pages 222-229.
  10. Paul Hubert, 2010. "Monetary Policy, Imperfect Information and the Expectations Channel," Sciences Po publications info:hdl:2441/f4rshpf3v1u, Sciences Po.
  11. David Reifschneider & Peter Tulip, 2007. "Gauging the uncertainty of the economic outlook from historical forecasting errors," Finance and Economics Discussion Series 2007-60, Board of Governors of the Federal Reserve System (U.S.).
  12. William T. Gavin & Geetanjali Pande, 2008. "FOMC consensus forecasts," Review, Federal Reserve Bank of St. Louis, issue May, pages 149-164.
  13. Liu, Dandan & Smith, Julie K., 2014. "Inflation forecasts and core inflation measures: Where is the information on future inflation?," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(1), pages 133-137.
  14. Edward N. Gamber & Julie K. Smith & Matthew Weiss, 2008. "Forecast Errors Before and After the Great Moderation," Working Papers 2008-001, The George Washington University, Department of Economics, Research Program on Forecasting, revised Mar 2009.

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