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The interdependences of central bank’s forecasts and economic agents inflation expectations.Empirical study

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  • Magdalena Szyszko

    (Wyższa Szkoła Bankowa w Poznaniu, Katedra Bankowości i Rynku Finansowego)

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    Abstract

    This paper focuses on the associations between the inflation forecasts of the central bank and inflation expectations of the households. The first part is of a descriptive nature. It gives the theoretical background of modern monetary policy focusing on the role of expectations. It also presents the idea of inflation forecast targeting. Then the framework of the inflation forecast targeting in four countries: the Czech Republic, Hungary, Poland and Romania is presented. The empirical part of the study is an attempt to find associations between the inflation forecasts results and inflation expectations of consumers derived on the basis of surveys. The theory gives sound background for the existence of such relationships.The interdependences are tested in several ways. The last part of the paper focuses on the results and conclusions.

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    Bibliographic Info

    Paper provided by National Bank of Poland, Economic Institute in its series National Bank of Poland Working Papers with number 105.

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    Length: 55
    Date of creation: 2011
    Date of revision:
    Handle: RePEc:nbp:nbpmis:105

    Note: This research project was conducted under the NBP Economic Research Committee’s open competition for research projects to be carried out by the NBP staff and economists from outside the NBP and was financed by the National Bank of Poland.
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    Keywords: inflation forecasts; inflation forecasts targeting; inflation expectations;

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    References

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    1. Stefano Eusepi & Bruce Preston, 2010. "Central Bank Communication and Expectations Stabilization," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(3), pages 235-71, July.
    2. Giuseppe Ferrero & Alessandro Secchi, 2009. "The Announcement of Monetary Policy Intentions," Temi di discussione (Economic working papers) 720, Bank of Italy, Economic Research and International Relations Area.
    3. Lyziak, Tomasz, 2003. "Consumer inflation expectations in Poland," Working Paper Series 0287, European Central Bank.
    4. Adam Kot & Michal Brzoza-Brzezina, 2008. "The Relativity Theory Revisited: Is Publishing Interest Rate Forecasts Really so Valuable?," National Bank of Poland Working Papers 52, National Bank of Poland, Economic Institute.
    5. Svensson, Lars E O, 1996. "Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," CEPR Discussion Papers 1511, C.E.P.R. Discussion Papers.
    6. Michael Ehrmann & David Sondermann, 2009. "The reception of public signals in financial markets – what if central bank communication becomes stale?," National Bank of Poland Working Papers 66, National Bank of Poland, Economic Institute.
    7. Svensson, Lars E. O., 1999. "Inflation targeting as a monetary policy rule," Journal of Monetary Economics, Elsevier, vol. 43(3), pages 607-654, June.
    8. Michal Skorepa & Viktor Kottlan, 2003. "Assessing future inflation in inflation targeting: forecasts or simulations?," BIS Papers chapters, in: Bank for International Settlements (ed.), Monetary policy in a changing environment, volume 19, pages 147-157 Bank for International Settlements.
    9. Forsells, Magnus & Kenny, Geoff, 2002. "The rationality of consumers' inflation expectations: survey-based evidence for the euro area," Working Paper Series 0163, European Central Bank.
    10. Camilo E Tovar, 2008. "DSGE models and central banks," BIS Working Papers 258, Bank for International Settlements.
    11. Frederic S Mishkin, 2004. "Can Central Bank Transparency Go Too Far?," RBA Annual Conference Volume, in: Christopher Kent & Simon Guttmann (ed.), The Future of Inflation Targeting Reserve Bank of Australia.
    12. Georgios Chortareas & David Stasavage & Gabriel Sterne, 2002. "Does it pay to be transparent? international evidence form central bank forecasts," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 99-118.
    13. Hans Gersbach, 2003. "On the negative social value of central banks' knowledge transparency," Economics of Governance, Springer, vol. 4(2), pages 91-102, 08.
    14. Tarkka, Juha & Mayes, David, 1999. "The Value of Publishing Official Central Bank Forecasts," Research Discussion Papers 22/1999, Bank of Finland.
    15. Konstantins Benkovskis, 2008. "The Role of Inflation Expectations in the New EU Member States: Consumer Survey Based Results," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 58(07-08), pages 298-317, Oktober.
    16. Magnus Forsells & Geoff Kenny, 2004. "Survey Expectations, Rationality and the Dynamics of Euro Area Inflation," Journal of Business Cycle Measurement and Analysis, OECD Publishing,CIRET, vol. 2004(1), pages 13-41.
    17. Remsperger, Hermann & Worms, Andreas, 1999. "Transparency in monetary policy," CFS Working Paper Series 1999/16, Center for Financial Studies (CFS).
    18. Kai Leitemo, 2006. "Open-Economy Inflation-Forecast Targeting," German Economic Review, Verein für Socialpolitik, vol. 7, pages 35-64, 02.
    19. Stephen G. Cecchetti & Stefan Krause, 2002. "Central bank structure, policy efficiency, and macroeconomic performance: exploring empirical relationships," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 47-60.
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