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Informational Advantage and Influence of Communicating Central Banks

Focusing on a set of central banks that publish their internal macroeconomic forecasts in real time enables one to shed light on the expectations channel of monetary policy. The main contribution of this paper is to assess whether central bank forecasts influence private forecasts. The response is positive for inflation forecasts in Sweden, the UK and Japan. To disentangle the sources of influence of central banks, two concepts are proposed: endogenous influence, which is due to more accurate central bank forecasts, and exogenous influence, which is due to central bank signals on either future policy decisions or private information. Original empirical evidence on the central bank forecasting performance relative to private agents is provided, and estimates show that in Sweden, more accurate inflation forecasts generate specific central bank influence that is different from the influence from signals. The publication of forecasts may therefore refer to two central banking strategies that aim to shape private expectations: forecasting or policymaking.

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Paper provided by Observatoire Francais des Conjonctures Economiques (OFCE) in its series Documents de Travail de l'OFCE with number 2009-04.

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Date of creation: 2009
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Handle: RePEc:fce:doctra:0904
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