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What Drives Forecaster Disagreement about Monetary Policy?

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Abstract

What can disagreement teach us about how private forecasters perceive the conduct of monetary policy? In a previous post, we showed that private forecasters disagree about both the short-term and the long-term evolution of key macroeconomic variables but that the shape of this disagreement differs across variables. In contrast to their views on other macroeconomic variables, private forecasters disagree substantially about the level of the federal funds rate that will prevail in the medium to long term but very little on the rate at shorter horizons. In this post, we explore the possible explanations for what drives forecasts of the federal funds rate, especially in the longer run.

Suggested Citation

  • Richard K. Crump & Stefano Eusepi, 2016. "What Drives Forecaster Disagreement about Monetary Policy?," Liberty Street Economics 20160815, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:87148
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    More about this item

    Keywords

    monetary policy rules; survey forecasts; expectations; imperfect information; term structure of disagreement;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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