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Expectations' Dispersion & Convergence towards Central Banks' IR forecasts: Chile, Colombia, Mexico, Peru & United Kingdom, 2004-2014

Author

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  • Barrera Chaupis, Carlos

Abstract

The study evaluates the effect of both the publication of Inflation Report (IR)’s forecasts and the subsequent media diffusion efforts (made by 5 central banks) on (i) the dispersion of ‘fixed-event’ forecasts for inflation and real growth produced by the macroeconomic insiders of a country (and gathered by Consensus Economics, Inc.), as well as (ii) the distance between their median and the aforementioned official forecasts. The 5 central banks correspond to the monetary authorities in Chile, Colombia, Mexico, Peru and United Kingdom. Statistically testing the effects on the dispersion and distance uses a common sample of monthly forecasts from 2004 to 2014 and reach high specificity by using separate samples according to the forecasting horizon (short and medium ‘term’) and the macroeconomic uncertainty level (IR publication months are classified as either high- or low-uncertainty months). With a significance level of 10 per cent, the general results are that (a) increases and decreases in the dispersion can be attributed to either IR forecast publication or media diffusion; and (b) increases and decreases in the distance can be attributed to either IR forecast publication or media diffusion, although the number of increases in the distance is low relative to (a). Comment from the author: It would be interesting to add results for more countries. Specifically, I was planning to add Canada and New Zealand. However, in the case of New Zealand, the corresponding series from Consensus Economics, Inc. is actually not available near Peru for the whole sample (the nearest one is actually located at the British Library!). There exists a critique addressing the econometric approach: it is related to the idea of causality and the need to use the difference-in-difference approach (this implies the need to include data from non-inflation-targeting countries). I am totally satisfied with the paper, though. In a nutshell, I consider more important to address the issue as if I were a medicine doctor wondering about whether the temperature is normal, high or low for the specific cases of 5 individuals instead of digressing about what is "normal temperature" for (say) 40 individuals.

Suggested Citation

  • Barrera Chaupis, Carlos, 2016. "Expectations' Dispersion & Convergence towards Central Banks' IR forecasts: Chile, Colombia, Mexico, Peru & United Kingdom, 2004-2014," MPRA Paper 85410, University Library of Munich, Germany, revised 12 Dec 2016.
    • Handle: RePEc:pra:mprapa:85410
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    References listed on IDEAS

    as
    1. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob De Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 910-945, December.
    2. Barrera, Carlos, 2013. "El sistema de predicción desagregada: Una evaluación de las proyecciones de inflación 2006-2011," Working Papers 2013-009, Banco Central de Reserva del Perú.
    3. Ager, P. & Kappler, M. & Osterloh, S., 2009. "The accuracy and efficiency of the Consensus Forecasts: A further application and extension of the pooled approach," International Journal of Forecasting, Elsevier, vol. 25(1), pages 167-181.
    4. Lucia Alessi & Eric Ghysels & Luca Onorante & Richard Peach & Simon Potter, 2014. "Central Bank Macroeconomic Forecasting During the Global Financial Crisis: The European Central Bank and Federal Reserve Bank of New York Experiences," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 32(4), pages 483-500, October.
    5. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob De Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 46(4), pages 910-945, December.
    6. repec:pri:cepsud:161blinder is not listed on IDEAS
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    Keywords

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    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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