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Monetary Policy Transparency and Uncertainty: A Comparison between the Bank of England and the Bundesbank/ECB

Author

Listed:
  • Iris Biefang-Frisancho Mariscal

    (School of Economics, University of the West of England)

  • Peter Howells

    () (School of Economics, University of the West of England)

Abstract

It is widely believed that institutional arrangements influence the quality of monetary policy outcomes. Judged on its ‘transparency’ characteristics, therefore the Bank of England should do better than the Bundesbank/ECB. We show that this is not confirmed by agents’ ability to anticipate central bank decisions. Furthermore, benefits from transparency should also show in a narrowing of the diversity in cross sectional forecasts. We show that the diversity in interest rate forecasts is no greater under the Bundesbank/ECB than the Bank of England. This suggests that other factors than ‘transparency’ may affect interest rate uncertainty. Increasing difficulty in forecasting inflation appears to play a part in the UK while being less of a problem in Germany.

Suggested Citation

  • Iris Biefang-Frisancho Mariscal & Peter Howells, 2005. "Monetary Policy Transparency and Uncertainty: A Comparison between the Bank of England and the Bundesbank/ECB," Working Papers 0508, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
  • Handle: RePEc:uwe:wpaper:0508
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    File URL: http://carecon.org.uk/DPs/0508.pdf
    File Function: First version, 2005
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    References listed on IDEAS

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    1. Georgios Chortareas & David Stasavage & Gabriel Sterne, 2003. "Does monetary policy transparency reduce disinflation costs?," Manchester School, University of Manchester, vol. 71(5), pages 521-540, September.
    2. Gabriel Pérez Quirós & Jorge Sicilia, 2002. "Is the European Central Bank (and the United States Federal Reserve) predictable?," Working Papers 0229, Banco de España;Working Papers Homepage.
    3. William Poole & Robert H & Rasche & Daniel L. Thornton, 2002. "Market anticipations of monetary policy actions," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 65-94.
    4. Daniel L. Thornton, 2003. "Monetary policy transparency: transparent about what?," Manchester School, University of Manchester, vol. 71(5), pages 478-497, September.
    5. Geraats, Petra M., 2000. "Why Adopt Transparency? The Publication of Central Bank Forecasts," Center for International and Development Economics Research, Working Paper Series qt0hw7h7cp, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
    6. Andrew G Haldane & Vicky Read, 2000. "Monetary policy surprises and the yield curve," Bank of England working papers 106, Bank of England.
    7. International Monetary Fund, 1998. "Anticipation and Surprises in Central Bank Interest Rate Policy; The Case of the Bundesbank," IMF Working Papers 98/43, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Pierdzioch, Christian & Rülke, Jan-Christoph, 2014. "Central banks’ interest rate projections and forecast coordination," The North American Journal of Economics and Finance, Elsevier, vol. 28(C), pages 130-137.

    More about this item

    Keywords

    transparency; yield curve; forecasting uncertainty; Bank of England; Bundesbank/ ECB;

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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