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The Value of Publishing Official Central Bank Forecasts

The aim of the present analysis is to shed light on the question whether Central Banks should publish their macroeconomic forecasts, and what could possibly be gained in monetary policy if they did so. We show that disclosing the Central Bank’s assessment of the prevailing inflationary pressures in the form of a forecast improves macroeconomic performance even if this assessment is imprecise. This is because it makes policy more predictable. We are also interested in finding out the useful content of the forecasts, if published, and answering the question whether it makes a difference if these official forecasts are “unconditional” in the sense of incorporating the Central Bank’s forecasts of its own policy as well, or “conditional” on some other policy assumption. Possible conditional alternatives may include assuming unchanged instruments, however specified, or assuming the kind of policy that the private sector is estimated to expect. The analysis comes out in favour of publishing unconditional forecasts, which reveal the intended results of monetary policy. A discussion of some practical issues related to publishing official macroeconomic forecasts is also provided.

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File URL: http://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/9922.pdf
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Paper provided by Bank of Finland in its series Research Discussion Papers with number 22/1999.

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Length: 42 pages
Date of creation: 31 Dec 1999
Date of revision:
Handle: RePEc:hhs:bofrdp:1999_022
Contact details of provider: Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.suomenpankki.fi/en/

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  1. Kenneth N. Kuttner & Adam S. Posen, 1999. "Does talk matter after all? Inflation targeting and central bank behavior," Staff Reports 88, Federal Reserve Bank of New York.
  2. Palmqvist, Stefan, 1999. "Why Central Banks Announce Their Objectives: Monetary Policy with Discretionary Signalling," Working Paper Series 78, Sveriges Riksbank (Central Bank of Sweden).
  3. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," CEPR Discussion Papers 2139, C.E.P.R. Discussion Papers.
  4. Svensson, Lars E.O., 1997. "Inflation Targeting: Some Extensions," Seminar Papers 625, Stockholm University, Institute for International Economic Studies.
  5. Backus, David & Driffill, John, 1985. "Inflation and Reputation," American Economic Review, American Economic Association, vol. 75(3), pages 530-38, June.
  6. Palmqvist, Stefan, 1999. "Why Central Banks Announce their Objectives: Monetary Policy with Discretionary Signalling," Seminar Papers 663, Stockholm University, Institute for International Economic Studies.
  7. Canzoneri, Matthew B, 1985. "Monetary Policy Games and the Role of Private Information," American Economic Review, American Economic Association, vol. 75(5), pages 1056-70, December.
  8. Palmqvist, S., 1999. "Why Central Banks Announce their Objectives: Monetary Policy with Discretionary Signalling," Papers 663, Stockholm - International Economic Studies.
  9. Faust, Jon & Svensson, Lars E O, 1998. "Transparency and Credibility: Monetary Policy with Unobservable Goals," CEPR Discussion Papers 1852, C.E.P.R. Discussion Papers.
  10. Athanasios Orphanides, 1998. "Monetary policy rules based on real-time data," Finance and Economics Discussion Series 1998-03, Board of Governors of the Federal Reserve System (U.S.).
  11. Athanasios Orphanides, 1998. "Monetary policy evaluation with noisy information," Finance and Economics Discussion Series 1998-50, Board of Governors of the Federal Reserve System (U.S.).
  12. Andrew T.. Levin & Volker Wieland & John Williams, 1999. "Robustness of Simple Monetary Policy Rules under Model Uncertainty," NBER Chapters, in: Monetary Policy Rules, pages 263-318 National Bureau of Economic Research, Inc.
  13. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
  14. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-67, March.
  15. Onatski, Alexei & Stock, James H., 2002. "Robust Monetary Policy Under Model Uncertainty In A Small Model Of The U.S. Economy," Macroeconomic Dynamics, Cambridge University Press, vol. 6(01), pages 85-110, February.
  16. Bennett T. McCallum, 1995. "Two Fallacies Concerning Central Bank Independence," NBER Working Papers 5075, National Bureau of Economic Research, Inc.
  17. Marvin Goodfriend, 1985. "Monetary mystique : secrecy and central banking," Working Paper 85-07, Federal Reserve Bank of Richmond.
  18. David Mayes & Bryan Chapple, 1995. "The costs and benefits of disinflation: a critique of the sacrifice ration," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 58, March.
  19. Joe Peek & Eric S. Rosengren & Geoffrey M.B. Tootell, 1997. "Is banking supervision central to central banking?," Working Papers 97-3, Federal Reserve Bank of Boston.
  20. Frederic S. Mishkin & Adam S. Posen, 1997. "Inflation targeting: lessons from four countries," Economic Policy Review, Federal Reserve Bank of New York, issue Aug, pages 9-110.
  21. Aaron Drew & Ben Hunt, 1998. "The Forecasting and Policy System: stochastic simulations of the core model," Reserve Bank of New Zealand Discussion Paper Series G98/6, Reserve Bank of New Zealand.
  22. Mayes, David G. & Razzak, W. A., 1998. "Transparency and accountability: Empirical models and policy making at the Reserve Bank of New Zealand," Economic Modelling, Elsevier, vol. 15(3), pages 377-394, July.
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