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What Affects the Predictions of Private Forecasters? The Role of Central Bank Forecasts


  • Michael Pedersen


This study analyses what affects the expectations of the private forecasters and, particularly, if they are influenced by the central bank's forecasts. The analysis uses data from the Economic Expectation Survey (EES), conducted by the Central Bank of Chile, and from the Monetary Policy Reports (IPoMs) covering the period 2001–2011. Short- and medium-term inflation expectations as well as short-term growth expectations are compared before and after the publication of a given issue of the IPoM, controlling for other factors, which may affect the expectations. These factors include Central Bank credibility, surprises in published data, and changes in the evaluation of the future interest rate, exchange rate and oil price. The results suggest that short-run inflation expectations (current year) of private forecasters are indeed influenced by the forecasts published by the central bank, mainly when these are lower and when they are published at the beginning of the year. They are also affected by surprises in published monthly inflation rates as well as by changes in the expectations for the exchange rate and monetary policy rate. The medium-term inflation expectations depend mainly on changes in short-run expectations, but oil price expectations and the future monetary policy rate also seem to matter. They are also influenced by central bank projections published in the last quarter of the year. The current year's GDP growth expectations in the EES are not affected by the central bank's forecasts as they are affected only by surprises in the monthly indicator of economic activity and the outlook for the monetary policy rate.

Suggested Citation

  • Michael Pedersen, 2013. "What Affects the Predictions of Private Forecasters? The Role of Central Bank Forecasts," Working Papers Central Bank of Chile 686, Central Bank of Chile.
  • Handle: RePEc:chb:bcchwp:686

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    References listed on IDEAS

    1. Paul Hubert, 2015. "Do Central Bank Forecasts Influence Private Agents? Forecasting Performance versus Signals," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(4), pages 771-789, June.
    2. Engelberg, Joseph & Manski, Charles F. & Williams, Jared, 2009. "Comparing the Point Predictions and Subjective Probability Distributions of Professional Forecasters," Journal of Business & Economic Statistics, American Statistical Association, vol. 27, pages 30-41.
    3. Michael Pedersen, 2013. "Extracting GDP signals from the monthly indicator of economic activity: Evidence from Chilean real-time data," OECD Journal: Journal of Business Cycle Measurement and Analysis, OECD Publishing, Centre for International Research on Economic Tendency Surveys, vol. 2013(1), pages 1-16.
    4. Fujiwara, Ippei, 2005. "Is the central bank's publication of economic forecasts influential?," Economics Letters, Elsevier, vol. 89(3), pages 255-261, December.
    5. Jakob de Haan & David-Jan Jansen, 2007. "The Importance of Being Vigilant: Has ECB Communication Influenced Euro Area Inflation Expectations?," CESifo Working Paper Series 2134, CESifo Group Munich.
    6. Michael Pedersen, 2010. "Una nota introductoria a la encuesta de Expectativas Económicas," Economic Statistics Series 82, Central Bank of Chile.
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    Cited by:

    1. Carlos Medel, 2017. "Forecasting Chilean inflation with the hybrid new keynesian Phillips curve: globalisation, combination, and accuracy," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 20(3), pages 004-050, December.

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