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Central bank forecasting: an international comparison

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  • John C. Robertson

Abstract

Forecasts, whether explicit or implicit, are at the heart of policy making. In considering forecasting for monetary policy, this article contrasts the forecasting processes at three central banks-the Reserve Bank of New Zealand, the Bank of England, and the U.S. Federal Reserve. ; In the United States policymakers consider confidential staff forecasts in policy discussions, but these do not necessarily represent the consensus forecasts of the policy committee. At the Bank of England, official published forecasts are the product of bank staff and the policy committee working closely together, and the forecasts therefore come much closer to representing the central view of the policymakers. A similar, but less formal, interaction takes place at the Reserve Bank of New Zealand, which on a regular basis publishes forecasts based on staff models under the name of the bank's governor. ; The discussion pays particular attention to the differences and similarities among the core models used by staff at these institutions. The analysis suggests that there is considerable similarity across central banks in the basic mechanics in producing forecasts. However, the author observes differences in the emphasis given to model-based forecasts relative to judgmental forecasts and those based on expert opinion. Banks with mandated inflation objectives have tended to favor model-based approaches as part of a strategy of ensuring that policy decisions are consistent with their inflation objectives and are as transparent to the public as possible.

Suggested Citation

  • John C. Robertson, 2000. "Central bank forecasting: an international comparison," Economic Review, Federal Reserve Bank of Atlanta, issue Q2, pages 21-32.
  • Handle: RePEc:fip:fedaer:y:2000:i:q2:p:21-32:n:v.85no.2
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    Cited by:

    1. Christopher G. Gibbs, 2017. "Forecast combination, non-linear dynamics, and the macroeconomy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), pages 653-686.
    2. Eickmeier, Sandra & Ng, Tim, 2011. "Forecasting national activity using lots of international predictors: An application to New Zealand," International Journal of Forecasting, Elsevier, pages 496-511.
    3. Shahzad Ahmad & Farooq Pasha, 2015. "A Pragmatic Model for Monetary Policy Analysis I: The Case of Pakistan," SBP Research Bulletin, State Bank of Pakistan, Research Department, vol. 11, pages 1-42.
    4. Katerina Smidkova, 2003. "Methods Available to Monetary Policy Makers to Deal with Uncertainty," Macroeconomics 0310002, EconWPA.

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    Keywords

    Banks and banking; Central ; Forecasting;

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