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The Relativity Theory Revisited: Is Publishing Interest Rate Forecasts Really so Valuable?

In a New Keynesian model with asymmetric information we show that publication of macroeconomic projections and of the future interest rate path by the central bank can improve macroeconomic outcomes. However, the gains from publishing interest rate paths are small relative to those from publishing macroeconomic projections. Given that most inflation targeting central banks are already publishing macroeconomic projections this means that most gains from increasing transparency in this area may already have been reaped. This, together with the potential costs, may explain the relative reluctance of central banks to publish interest rate paths.

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File URL: http://www.nbp.pl/publikacje/materialy_i_studia/52_en.pdf
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Paper provided by National Bank of Poland, Economic Institute in its series National Bank of Poland Working Papers with number 52.

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Length: 24
Date of creation: Nov 2008
Date of revision:
Handle: RePEc:nbp:nbpmis:52
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Web page: http://www.nbp.pl/Homen.aspx?f=/en/publikacje/materialy_i_studia/informacja_en.html

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  1. George W. Evans & Seppo Honkapohja, 2002. "Monetary Policy, Expectations and Commitment," University of Oregon Economics Department Working Papers 2002-11, University of Oregon Economics Department, revised 01 Feb 2004.
  2. Glenn D. Rudebusch, 2008. "Publishing central bank interest rate forecasts," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue jan25.
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  4. Orphanides, Athanasios & Williams, John C., 2007. "Robust monetary policy with imperfect knowledge," Working Paper Series 0764, European Central Bank.
  5. Glenn D. Rudebusch & John C. Williams, 2008. "Revealing the Secrets of the Temple: The Value of Publishing Central Bank Interest Rate Projections," NBER Chapters, in: Asset Prices and Monetary Policy, pages 247-289 National Bureau of Economic Research, Inc.
  6. Evans, George W. & Honkapohja, Seppo, 2008. "Expectations, Learning and Monetary Policy: An Overview of Recent Rersearch," CEPR Discussion Papers 6640, C.E.P.R. Discussion Papers.
  7. Muto, Ichiro, 2011. "Monetary policy and learning from the central bank's forecast," Journal of Economic Dynamics and Control, Elsevier, vol. 35(1), pages 52-66, January.
  8. Welz, Peter, 2006. "Assessing predetermined expectations in the standard sticky-price model: a Bayesian approach," Working Paper Series 0621, European Central Bank.
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  12. Evans, George W. & McGough, Bruce, 2005. "Monetary policy, indeterminacy and learning," Journal of Economic Dynamics and Control, Elsevier, vol. 29(11), pages 1809-1840, November.
  13. Geraats Petra M., 2005. "Transparency and Reputation: The Publication of Central Bank Forecasts," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-28, February.
  14. Giuseppe Ferrero & Alessandro Secchi, 2009. "The Announcement of Monetary Policy Intentions," Temi di discussione (Economic working papers) 720, Bank of Italy, Economic Research and International Relations Area.
  15. Goodfriend, Marvin, 1986. "Monetary mystique: Secrecy and central banking," Journal of Monetary Economics, Elsevier, vol. 17(1), pages 63-92, January.
  16. Georgios Chortareas & David Stasavage & Gabriel Sterne, 2001. "Does it pay to be transparent? International evidence from central bank forecasts," Bank of England working papers 143, Bank of England.
  17. Petra M. Geraats, 2002. "Central Bank Transparency," Economic Journal, Royal Economic Society, vol. 112(483), pages 532-565, November.
  18. Tarkka, Juha & Mayes, David, 1999. "The Value of Publishing Official Central Bank Forecasts," Research Discussion Papers 22/1999, Bank of Finland.
  19. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
  20. Eusepi, Stefano & Preston, Bruce, 2007. "Central bank communication and expectations stabilization," Proceedings, Federal Reserve Bank of San Francisco, issue March, pages 1-43.
  21. Sims, Christopher A, 2002. "Solving Linear Rational Expectations Models," Computational Economics, Society for Computational Economics, vol. 20(1-2), pages 1-20, October.
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