Are Central Banks' Projections Meaningful?
Central banks’ projections– i.e. forecasts conditional on a given interest rate path– are often criticized on the grounds that their underlying policy assumptions are inconsistent with the existence of a unique equilibrium in many forward-looking models. The present paper describes three alternative approaches to constructing projections that are not subject to that criticism, using a standard New Keynesian model as a reference framework. Yet, and even though they imply an identical path for the interest rate, the three approaches are shown to generate di¤erent projections for inflation and output. That result calls into question the meaning and usefulness of such projections.
|Date of creation:||2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.EconomicDynamics.org/society.htm
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Seppo Honkapohja & Kaushik Mitra, 2004.
" Performance of Inflation Targeting Based on Constant Interest Rate Projections,"
CDMA Conference Paper Series
0406, Centre for Dynamic Macroeconomic Analysis.
- Honkapohja, Seppo & Mitra, Kaushik, 2005. "Performance of inflation targeting based on constant interest rate projections," Journal of Economic Dynamics and Control, Elsevier, vol. 29(11), pages 1867-1892, November.
- Honkapohja, Seppo & Mitra, Kaushik, 2003. "Performance of inflation targeting based on constant interest rate projections," CFS Working Paper Series 2003/39, Center for Financial Studies (CFS).
- Kaushik Mitra & Seppo Honkapohja, 2004. "Performance of Inflation Targeting Based on constant Interest Rate Projections," Computing in Economics and Finance 2004 130, Society for Computational Economics.
- Honkapohja, Seppo & Mitra, Kaushik, 2003. "Performance of Inflation Targeting Based on Constant Interest Rate Projections," CEPR Discussion Papers 4126, C.E.P.R. Discussion Papers.
- Kaushik Mitra & Seppo Honkapohja, 2004. "Performance of Inflation Targeting Based On Constant Interest Rate Projections," Royal Holloway, University of London: Discussion Papers in Economics 04/15, Department of Economics, Royal Holloway University of London, revised Jul 2004.
- James Bullard & Kaushik Mitra, 2002.
"Learning about monetary policy rules,"
2000-001, Federal Reserve Bank of St. Louis.
- Jess Benhabib & Stephanie Schmitt-Grohe & Martin Uribe, 1998.
"The perils of Taylor Rules,"
Departmental Working Papers
199831, Rutgers University, Department of Economics.
- Benhabib, Jess & Schmitt-Grohe, Stephanie & Uribe, Martin, 1998. "The Perils of Taylor Rules," Working Papers 98-37, C.V. Starr Center for Applied Economics, New York University.
- Benhabib, Jess & Schmitt-Grohé, Stephanie & Uribe, Martín, 1999. "The Perils of Taylor Rules," CEPR Discussion Papers 2314, C.E.P.R. Discussion Papers.
- Frank Smets & Rafael Wouters, 2005. "Bayesian New Neoclassical Synthesis (NNS) Models: Modern Tools for Central Banks," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 422-433, 04/05.
When requesting a correction, please mention this item's handle: RePEc:red:sed008:174. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann)
If references are entirely missing, you can add them using this form.