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The Value of Publishing Official Central Bank Forecasts

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Author Info
Tarkka , Juha () (Bank of Finland)
Mayes, David () (Bank of Finland)

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Abstract

The aim of the present analysis is to shed light on the question whether Central Banks should publish their macroeconomic forecasts, and what could possibly be gained in monetary policy if they did so. We show that disclosing the Central Bank’s assessment of the prevailing inflationary pressures in the form of a forecast improves macroeconomic performance even if this assessment is imprecise. This is because it makes policy more predictable. We are also interested in finding out the useful content of the forecasts, if published, and answering the question whether it makes a difference if these official forecasts are “unconditional” in the sense of incorporating the Central Bank’s forecasts of its own policy as well, or “conditional” on some other policy assumption. Possible conditional alternatives may include assuming unchanged instruments, however specified, or assuming the kind of policy that the private sector is estimated to expect. The analysis comes out in favour of publishing unconditional forecasts, which reveal the intended results of monetary policy. A discussion of some practical issues related to publishing official macroeconomic forecasts is also provided.

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File URL: http://www.bof.fi/NR/rdonlyres/6F174303-F6AB-4381-8C7A-C80BC62076DD/0/9922.pdf
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Publisher Info
Paper provided by Bank of Finland in its series Research Discussion Papers with number 22/1999.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 42 pages
Date of creation: 31 Dec 1999
Date of revision:
Handle: RePEc:hhs:bofrdp:1999_022

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Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.bof.fi/en/tutkimus
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Related research
Keywords: forecasting; transparency; monetary policy; central banks;

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References listed on IDEAS
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.:
  1. Richard Clarida & Jordi Gali & Mark Gertler, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December. [Downloadable!] (restricted)
    Other versions:
  2. Bennett T. McCallum, 1995. "Two Fallacies Concerning Central Bank Independence," NBER Working Papers 5075, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Jon Faust & Lars E.O. Svensson, 1998. "Transparency and credibility: monetary policy with unobservable goals," International Finance Discussion Papers 605, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  4. Andrew Levin & Volker Wieland & John C. Williams, 1998. "Robustness of Simple Monetary Policy Rules under Model Uncertainty," NBER Working Papers 6570, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Svensson, L-E-O, 1997. "Inflation Targeting : Some Extensions," Papers 625, Stockholm - International Economic Studies.
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  6. Palmqvist, Stefan, 1999. "Why Central Banks Announce their Objectives: Monetary Policy with Discretionary Signalling," Seminar Papers 663, Stockholm University, Institute for International Economic Studies. [Downloadable!]
  7. Canzoneri, Matthew B, 1985. "Monetary Policy Games and the Role of Private Information," American Economic Review, American Economic Association, vol. 75(5), pages 1056-70, December. [Downloadable!] (restricted)
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  8. Goodfriend, Marvin, 1986. "Monetary mystique: Secrecy and central banking," Journal of Monetary Economics, Elsevier, vol. 17(1), pages 63-92, January. [Downloadable!] (restricted)
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  9. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-67, March. [Downloadable!] (restricted)
  10. Aaron Drew & Ben Hunt, 1998. "The Forecasting and Policy System: stochastic simulations of the core model," Reserve Bank of New Zealand Discussion Paper Series G98/6, Reserve Bank of New Zealand. [Downloadable!]
  11. David Mayes & Bryan Chapple, 1995. "The costs and benefits of disinflation: a critique of the sacrifice ration," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 58, March. [Downloadable!]
  12. Palmqvist, Stefan, 1999. "Why Central Banks Announce Their Objectives: Monetary Policy with Discretionary Signalling," Working Paper Series 78, Sveriges Riksbank (Central Bank of Sweden). [Downloadable!]
  13. Mayes, David G. & Razzak, W. A., 1998. "Transparency and accountability: Empirical models and policy making at the Reserve Bank of New Zealand," Economic Modelling, Elsevier, vol. 15(3), pages 377-394, July. [Downloadable!] (restricted)
  14. Athanasios Orphanides, 1998. "Monetary policy evaluation with noisy information," Finance and Economics Discussion Series 1998-50, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  15. Alexei Onatski & James H. Stock, 1999. "Robust monetary policy under model uncertainty in a small model of the U.S. economy," Proceedings, Federal Reserve Bank of San Francisco.
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  16. Kenneth N. Kuttner & Adam S. Posen, 1999. "Does talk matter after all? Inflation targeting and central bank behavior," Staff Reports 88, Federal Reserve Bank of New York. [Downloadable!]
  17. Palmqvist, S., 1999. "Why Central Banks Announce their Objectives: Monetary Policy with Discretionary Signalling," Papers 663, Stockholm - International Economic Studies.
  18. 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. [Downloadable!] (restricted)
  19. Joe Peek & Eric S. Rosengren & Geoffrey M.B. Tootell, 1997. "Is banking supervision central to central banking?," Working Papers 97-3, Federal Reserve Bank of Boston. [Downloadable!]
  20. Backus, David & Driffill, John, 1985. "Inflation and Reputation," American Economic Review, American Economic Association, vol. 75(3), pages 530-38, June. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, 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.)

  1. Rochet, Jean Charles & Vives, Xavier, 2002. "Coordination Failures and the Lender of Last Resort: Was Bagehot Right After All?," CEPR Discussion Papers 3233, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Bernhard Winkler, 2000. "Which kind of transparency? On the need for clarity in monetary policy-making," Working Paper Series 26, European Central Bank. [Downloadable!]
  3. Toni Gravelle & Richhild Moessner, 2001. "Reactions of Canadian Interest Rates to Macroeconomic Announcements: Implications for Monetary Policy Transparency," Working Papers 01-5, Bank of Canada. [Downloadable!]
  4. Sophocles N. Brissimis & Nicholas S. Magginas, 2006. "Monetary Policy Rules under Heterogeneous Inflation Expectations," Working Papers 35, Bank of Greece. [Downloadable!]
  5. Marco Vega, 2004. "Policy Makers Priors and Inflation Density Forecasts," Econometrics 0403005, EconWPA. [Downloadable!]
  6. Petra M. Geraats, 2005. "Transparency and Reputation: The Publication of Central Bank Forecasts," The B.E. Journal of Macroeconomics, Berkeley Electronic Press, vol. 0(1). [Downloadable!]
  7. Eijffinger, Sylvester C W & Geraats, Petra M, 2002. "How Transparent are Central Banks?," CEPR Discussion Papers 3188, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  8. Javier Gómez & José Darío Uribe & Hernando Vargas, . "The Implementation of Inflation Targeting in Colombia," Borradores de Economia 202, Banco de la Republica de Colombia. [Downloadable!]
  9. Brzoza-Brzezina, Michal & Kot, Adam, 2008. "The Relativity Theory Revisited: Is Publishing Interest Rate Forecasts Really so Valuable?," MPRA Paper 10296, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  10. Seth B. Carpenter, 2004. "Transparency and monetary policy: what does the academic literature tell policymakers?," Finance and Economics Discussion Series 2004-35, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  11. Petra Geraats, 2000. "Why Adopt Transparency? The Publication of Central Bank Forecasts," Center for International and Development Economics Research, Working Paper Series 1009, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley. [Downloadable!]
    Other versions:
  12. David Marston, . "Financial System Standards and Financial Stability: The Case of Basel Core Principles," IMF Working Papers 01/62, International Monetary Fund. [Downloadable!]
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