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Using bank supervisory data to improve macroeconomic forecasts

Author

Listed:
  • Joe Peek
  • Eric S. Rosengren
  • Geoffrey M. B. Tootell

Abstract

Locating the function of bank supervision in the central bank has been a contentious issue, both domestically and internationally. Most discussions of the role of bank supervision in central banking have focused on crisis management and the responsibilities of the central bank as a lender of last resort. However, recent research by the authors has shown that confidential supervisory information garnered through bank examinations potentially can improve the forecasts of key macroeconomic variables and thus the conduct of monetary policy. Forecasting macroeconomic variables is essential to the conduct of monetary policy, since the long lags in the effect of monetary policy ensure that changes in monetary policy today alter the economy only in the future. This article explores further the robustness of the results reported earlier. It examines the pattern of the forecast errors of the individual private forecasters studied, and confirms the earlier results. Thus, the article concludes that an important reason for central banks to have access to confidential supervisory information, and possibly to participate in its collection, is that such information can improve macroeconomic forecasts and in this way improve monetary policy decision-making.

Suggested Citation

  • Joe Peek & Eric S. Rosengren & Geoffrey M. B. Tootell, 1999. "Using bank supervisory data to improve macroeconomic forecasts," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 21-32.
  • Handle: RePEc:fip:fedbne:y:1999:i:sep:p:21-32
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    References listed on IDEAS

    as
    1. Peek, Joe & Rosengren, Eric, 1995. "Bank regulation and the credit crunch," Journal of Banking & Finance, Elsevier, vol. 19(3-4), pages 679-692, June.
    2. Michael W. Klein & Giovanni Olivei, 1999. "Capital Account Liberalization, Financial Depth and Economic Growth," NBER Working Papers 7384, National Bureau of Economic Research, Inc.
    3. Joe Peek & Eric S. Rosengren & Geoffrey M. B. Tootell, 1999. "Is Bank Supervision Central to Central Banking?," The Quarterly Journal of Economics, Oxford University Press, pages 629-653.
    4. Hansen, Lars Peter & Hodrick, Robert J, 1980. "Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 829-853, October.
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    8. Jeremy C. Stein, 1998. "An Adverse-Selection Model of Bank Asset and Liability Management with Implications for the Transmission of Monetary Policy," RAND Journal of Economics, The RAND Corporation, pages 466-486.
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    16. Jeremy C. Stein, 1998. "An Adverse-Selection Model of Bank Asset and Liability Management with Implications for the Transmission of Monetary Policy," RAND Journal of Economics, The RAND Corporation, pages 466-486.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The mythic quest for early warnings
      by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2015-04-13 17:40:01

    Citations

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    Cited by:

    1. Marco Hoeberichts, 2002. "The Credibility of Central Bank Announcements," Working Papers 0221, Banco de España;Working Papers Homepage.
    2. Péter Gábriel & Klára Pintér, 2006. "The effect of the MNB’s communication on financial markets," MNB Working Papers 2006/9, Magyar Nemzeti Bank (Central Bank of Hungary).
    3. Marco Hoeberichts, 2002. "The Credibility of Central Bank Announcements," Working Papers 0221, Banco de España;Working Papers Homepage.
    4. Chortareas, Georgios & Logothetis, Vassileios & Magkonis, Georgios & Zekente, Kalliopi-Maria, 2016. "The effect of banking supervision on central bank preferences: Evidence from panel data," Economics Letters, Elsevier, vol. 140(C), pages 11-13.

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