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Central Bank Forecasts as an Instrument of Monetary Policy

Policymakers at the Federal Open Market Committee (FOMC) publish macroeconomic forecasts since 1979. Some studies find that these forecasts do not contain useful information to predict these macroeconomic variables compared to other forecasts. In this paper, we examine the value of publishing these FOMC forecasts in two steps. We assess whether they influence private forecasts and whether they may be considered as a policy instrument. We provide original evidence that FOMC forecasts are able to influence private expectations. We also find that FOMC forecasts give information about future Fed rate movements, affect policy variables in a different way from the Fed rate, and respond differently to macro shocks.

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File URL: http://www.ofce.sciences-po.fr/pdf/dtravail/WP2011-23.pdf
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Paper provided by Observatoire Francais des Conjonctures Economiques (OFCE) in its series Documents de Travail de l'OFCE with number 2011-23.

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Date of creation: Nov 2011
Handle: RePEc:fce:doctra:1123
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