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Monetary Policy Uncertainty: Is There a Difference Between Bank of England and the Bundesbank/ECB?

Author

Listed:
  • Iris Biefang-Frisancho Mariscal
  • 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 both the Bundesbank and ECB. However, studies based on market evidence show that on average, agents anticipate policy moves by both banks equally well. Since benefits from transparency should also show in a narrowing of the diversity in cross sectional forecasts, this paper extends the existing literature in an attempt to reconcile the contradictory evidence on ‘transparency’ of both banks. We show that the diversity in interest rate forecasts is greater under the Bundesbank/ECB than the Bank of England. Other factors than ‘transparency’ do not seem to affect interest rate uncertainty in Germany. Increasing difficulty in forecasting inflation appears to explain in part UK interest rate forecast dispersion.

Suggested Citation

  • Iris Biefang-Frisancho Mariscal & Peter Howells, 2006. "Monetary Policy Uncertainty: Is There a Difference Between Bank of England and the Bundesbank/ECB?," Working Papers 0613, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    • Handle: RePEc:uwe:wpaper:0613
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    File URL: http://carecon.org.uk/DPs/0613.pdf
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    References listed on IDEAS

    as
    1. Gabriel Pérez Quirós & Jorge Sicilia, 2002. "Is the European Central Bank (and the United States Federal Reserve) predictable?," Working Papers 0229, Banco de España.
    2. Daniel C. Hardy, 1998. "Anticipation and Surprises in Central Bank Interest Rate Policy: The Case of the Bundesbank," IMF Staff Papers, Palgrave Macmillan, vol. 45(4), pages 647-671, December.
    3. International Monetary Fund, 1998. "Anticipation and Surprises in Central Bank Interest Rate Policy: The Case of the Bundesbank," IMF Working Papers 1998/043, International Monetary Fund.
    4. 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.
    5. Lorenzo Bini Smaghi & Daniel Gros, 2000. "Open Issues in European Central Banking," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-333-98188-7.
    6. Andrew G Haldane & Vicky Read, 2000. "Monetary policy surprises and the yield curve," Bank of England working papers 106, Bank of England.
    7. Mr. Kevin Ross, 2002. "Market Predictability of ECB Policy Decisions: A Comparative Examination," IMF Working Papers 2002/233, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Stephanos Papadamou & Moïse Sidiropoulos & Eleftherios Spyromitros, 2017. "Is There a Role for Central Bank Independence on Public Debt Dynamics?," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 7(1), pages 1-6.
    2. Stephanos Papadamou & Moïse Sidiropoulos & Eleftherios Spyromitros, 2016. "Central Bank Independence and the Dynamics of Public Debt?," Working Papers of BETA 2016-15, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    3. Stephanos Papadamou & Moïse Sidiropoulos & Eleftherios Spyromitros, 0. "Is There a Role for Central Bank Independence on Public Debt Dynamics?," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 0, pages 6.

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    More about this item

    Keywords

    transparency; yield curve; forecasting uncertainty; Bank of England; Bundesbank; ECB;
    All these keywords.

    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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