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Monetary Policy Transparency and Uncertainty: A Comparison between the Bank of England and the Bundesbank/ECB

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Author Info

  • Iris Biefang-Frisancho Mariscal

    (School of Economics, University of the West of England)

  • Peter Howells

    () (School of Economics, University of the West of England)

Abstract

It is widely believed that institutional arrangements influence the quality of monetary policy outcomes. Judged on its ‘transparency’ characteristics, therefore the Bank of England should do better than the Bundesbank/ECB. We show that this is not confirmed by agents’ ability to anticipate central bank decisions. Furthermore, benefits from transparency should also show in a narrowing of the diversity in cross sectional forecasts. We show that the diversity in interest rate forecasts is no greater under the Bundesbank/ECB than the Bank of England. This suggests that other factors than ‘transparency’ may affect interest rate uncertainty. Increasing difficulty in forecasting inflation appears to play a part in the UK while being less of a problem in Germany.

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File URL: http://carecon.org.uk/DPs/0508.pdf
File Function: First version, 2005
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Bibliographic Info

Paper provided by University of the West of England, Department of Economics in its series Discussion Papers with number 0508.

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Length: 22 pages
Date of creation: Oct 2005
Date of revision:
Handle: RePEc:uwe:wpaper:0508

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Keywords: transparency; yield curve; forecasting uncertainty; Bank of England; Bundesbank/ ECB;

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  1. Andrew G Haldane & Vicky Read, 2000. "Monetary policy surprises and the yield curve," Bank of England working papers 106, Bank of England.
  2. Daniel L. Thornton, 2003. "Monetary policy transparency: transparent about what?," Manchester School, University of Manchester, vol. 71(5), pages 478-497, 09.
  3. Jorge Sicilia & Gabriel Perez-Quiros, 2002. "Is the European Central Bank (and the United States Federal Reserve) predictable?," Working Paper Series 192, European Central Bank.
  4. William Poole & Robert H & Rasche & Daniel L. Thornton, 2002. "Market anticipations of monetary policy actions," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 65-94.
  5. International Monetary Fund, 1998. "Anticipation and Surprises in Central Bank Interest Rate Policy: The Case of the Bundesbank," IMF Working Papers 98/43, International Monetary Fund.
  6. Georgios Chortareas & David Stasavage & Gabriel Sterne, 2003. "Does monetary policy transparency reduce disinflation costs?," Manchester School, University of Manchester, vol. 71(5), pages 521-540, 09.
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