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How forward-looking are central banks? Some evidence from their forecasts


  • Michał Brzoza-Brzezina
  • Jacek Kotłowski
  • Agata Miśkowiec


We estimate forward-looking Taylor rules on data from macroeconomic forecasts of three central banks in order to determine the extent to which these banks are forward-looking. We find that all three banks are to some extent forward-looking, albeit to a varying degree. In general, the horizons for inflation seem to be longer than for output. We also find that central banks prefer to concentrate on one particular horizon rather than take into account the whole forecast.

Suggested Citation

  • Michał Brzoza-Brzezina & Jacek Kotłowski & Agata Miśkowiec, 2013. "How forward-looking are central banks? Some evidence from their forecasts," Applied Economics Letters, Taylor & Francis Journals, vol. 20(2), pages 142-146, February.
  • Handle: RePEc:taf:apeclt:v:20:y:2013:i:2:p:142-146 DOI: 10.1080/13504851.2012.684780

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    References listed on IDEAS

    1. Nicoletta Batini & Paul Levine & Joseph Pearlman, 2003. "Indeterminacy with inflation-forecast-cased rules in a two-bloc model," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
    2. Jan Strasky, 2005. "Optimal Forward-Looking Policy Rules in the Quarterly Projection Model of the Czech National Bank," Research and Policy Notes 2005/05, Czech National Bank, Research Department.
    3. Davutyan, Nurhan & Parke, William R, 1995. "The Operations of the Bank of England, 1890-1908: A Dynamic Probit Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 1099-1112, November.
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    5. Kai Carstensen, 2006. "Estimating the ECB Policy Reaction Function," German Economic Review, Verein für Socialpolitik, vol. 7, pages 1-34, February.
    6. Leitemo, Kai, 2008. "Inflation-targeting rules: History-dependent or forward-looking?," Economics Letters, Elsevier, vol. 100(2), pages 267-270, August.
    7. Eichengreen, Barry & Watson, Mark W & Grossman, Richard S, 1985. "Bank Rate Policy under the Interwar Gold Standard: A Dynamic Probit Model," Economic Journal, Royal Economic Society, vol. 95(379), pages 725-745, September.
    8. Jamie Gascoigne & Paul Turner, 2004. "Asymmetries in Bank of England monetary policy," Applied Economics Letters, Taylor & Francis Journals, vol. 11(10), pages 615-618.
    9. Joyce, Michael & Lasaosa, Ana & Stevens , Ibrahim & Tong, Matthew, 2010. "The financial market impact of quantitative easing," Bank of England working papers 393, Bank of England.
    10. Aaron Drew & Adrian Orr, 1999. "The Reserve Bank's role in the recent business cycle: actions and evolutions," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 62, March.
    11. Nicoletta Batini & Joseph Pearlman, 2002. "Too Much Too Soon: Instability and Indeterminacy with Forward-Looking Rules," Discussion Papers 08, Monetary Policy Committee Unit, Bank of England.
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    Cited by:

    1. Aleksandra Halka, 2016. "How the central bank’s reaction function in small open economies evolved during the crisis," Bank i Kredyt, Narodowy Bank Polski, vol. 47(4), pages 301-318.
    2. Aleksandra Halka, 2015. "Lessons from the crisis.Did central banks do their homework?," NBP Working Papers 224, Narodowy Bank Polski, Economic Research Department.
    3. Maciej Ryczkowski, 2016. "Poland as an inflation nutter:The story of successful output stabilization," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics, vol. 34(2), pages 363-392.

    More about this item

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies


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