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Do macroeconomic announcements move inflation forecasts?

  • Marlene Amstad
  • Andreas M. Fischer

This paper presents an empirical strategy that bridges the gap between event studies and macroeconomic forecasts based on common-factor models. Event studies examine the response of financial variables to a market-sensitive "surprise" component using a narrow event window. The authors argue that these features - narrow event window and surprise component - can be easily embedded in common-factor models that study the real-time impact of macroeconomic announcements on key policy variables such as inflation or gross domestic product growth. Demonstrative applications are provided for Swiss inflation that show that (i) the communication of monetary policy announcements generates an asymmetric response for inflation forecasts, (ii) the pass-through effect of import price releases on inflation forecasts is weak, and (iii) macroeconomic releases of real and nominal variables generate nonsynchronized effects for inflation forecasts.

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Article provided by Federal Reserve Bank of St. Louis in its journal Review.

Volume (Year): (2009)
Issue (Month): Sep ()
Pages: 507-518

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Handle: RePEc:fip:fedlrv:y:2009:i:sep:p:507-518:n:v.91no.5,pt.2
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  1. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob de Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," DNB Working Papers 170, Netherlands Central Bank, Research Department.
  2. J. McCarthy, 1999. "Pass-through of exchange rates and import prices to domestic inflation in some industrialised economies," BIS Working Papers 79, Bank for International Settlements.
  3. James D. Hamilton & Oscar Jorda, 2002. "A Model of the Federal Funds Rate Target," Journal of Political Economy, University of Chicago Press, vol. 110(5), pages 1135-1167, October.
  4. Don Harding & Adrian Pagan, 2000. "Disecting the Cycle: A Methodological Investigation," Econometric Society World Congress 2000 Contributed Papers 1164, Econometric Society.
  5. Giannone, Domenico & Reichlin, Lucrezia & Small, David H., 2006. "Nowcasting GDP and inflation: the real-time informational content of macroeconomic data releases," Working Paper Series 0633, European Central Bank.
  6. Amstad, Marlene & Fischer, Andreas M., 2009. "Monthly pass-through ratios," Globalization and Monetary Policy Institute Working Paper 26, Federal Reserve Bank of Dallas.
  7. Riccardo Cristadoro & Mario Forni & Lucrezia Reichlin & Giovanni Veronese, 2005. "A core inflation indicator for the Euro area," ULB Institutional Repository 2013/10131, ULB -- Universite Libre de Bruxelles.
  8. Mario Forni & Filippo Altissimo & Riccardo Cristadoro & Marco Lippi & Giovanni Veronese., 2008. "New Eurocoin: Tracking Economic Growth in Real Time," Center for Economic Research (RECent) 020, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
  9. Michael J. Dueker & Andreas M. Fischer, 2005. "Open mouth operations: a Swiss case study," Monetary Trends, Federal Reserve Bank of St. Louis, issue Jan.
  10. Mario Forni & Marc Hallin & Lucrezia Reichlin & Marco Lippi, 2000. "The generalised dynamic factor model: identification and estimation," ULB Institutional Repository 2013/10143, ULB -- Universite Libre de Bruxelles.
  11. Mario Forno & Marco Lippi & Lucrezia Reichlin & Filippo Altissimo & Antonio Bassanetti, 2003. "Eurocoin: A Real Time Coincident Indicator Of The Euro Area Business Cycle," Computing in Economics and Finance 2003 242, Society for Computational Economics.
  12. Joseph E. Gagnon & Jane E. Ihrig, 2001. "Monetary policy and exchange rate pass-through," International Finance Discussion Papers 704, Board of Governors of the Federal Reserve System (U.S.).
  13. repec:pri:cepsud:161blinder is not listed on IDEAS
  14. Marc Hallin & Mario Forni & Marco Lippi & Lucrezia Reichlin, 2003. "Do financial variables help forecasting inflation and real activity in the Euro area ?," ULB Institutional Repository 2013/2123, ULB -- Universite Libre de Bruxelles.
  15. Roberto Rigobon & Brian Sack, 2006. "Noisy Macroeconomic Announcements, Monetary Policy, and Asset Prices," NBER Working Papers 12420, National Bureau of Economic Research, Inc.
  16. Smith, R Todd, 1992. "The Cyclical Behavior of Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(4), pages 413-30, November.
  17. Marlene Amstad & Andreas M. Fischer, 2008. "Are Weekly Inflation Forecasts Informative?," Working Papers 2008-05, Swiss National Bank.
  18. Ravn, Morten O. & Sola, Martin, 1995. "Stylized facts and regime changes: Are prices procyclical?," Journal of Monetary Economics, Elsevier, vol. 36(3), pages 497-526, December.
  19. Stock, James H & Watson, Mark W, 2002. "Macroeconomic Forecasting Using Diffusion Indexes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 147-62, April.
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