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Monetary Policy Uncertainty: Is There a Difference Between Bank of England and the Bundesbank/ECB?

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Author Info

  • Iris Biefang-Frisancho Mariscal
  • 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 both the Bundesbank and ECB. However, studies based on market evidence show that on average, agents anticipate policy moves by both banks equally well. Since benefits from transparency should also show in a narrowing of the diversity in cross sectional forecasts, this paper extends the existing literature in an attempt to reconcile the contradictory evidence on ‘transparency’ of both banks. We show that the diversity in interest rate forecasts is greater under the Bundesbank/ECB than the Bank of England. Other factors than ‘transparency’ do not seem to affect interest rate uncertainty in Germany. Increasing difficulty in forecasting inflation appears to explain in part UK interest rate forecast dispersion.

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File URL: http://carecon.org.uk/DPs/0613.pdf
File Function: First version, 2006
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Bibliographic Info

Paper provided by Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol in its series Working Papers with number 0613.

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Length: 17 pages
Date of creation: Nov 2006
Date of revision:
Handle: RePEc:uwe:wpaper:0613

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

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  1. Pérez Quirós, Gabriel & Sicilia, Jorge, 2002. "Is the European Central Bank (and the United States Federal Reserve) predictable?," Working Paper Series 0192, European Central Bank.
  2. International Monetary Fund, 1998. "Anticipation and Surprises in Central Bank Interest Rate Policy," IMF Working Papers 98/43, International Monetary Fund.
  3. Kevin Ross, 2002. "Market Predictability of ECB Monetary Policy Decisions," IMF Working Papers 02/233, International Monetary Fund.
  4. Andrew G Haldane & Vicky Read, 2000. "Monetary policy surprises and the yield curve," Bank of England working papers 106, Bank of England.
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