Monetary Policy Uncertainty: Is There a Difference Between Bank of England and the Bundesbank/ECB?
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.
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- Gabriel Pérez Quirós & Jorge Sicilia, 2002.
"Is the European Central Bank (and the United States Federal Reserve) predictable?,"
0229, Banco de España;Working Papers Homepage.
- Pérez Quirós, Gabriel & Sicilia, Jorge, 2002. "Is the European Central Bank (and the United States Federal Reserve) predictable?," Working Paper Series 0192, European Central Bank.
- Kevin Ross, 2002. "Market Predictability of ECB Policy Decisions; A Comparative Examination," IMF Working Papers 02/233, International Monetary Fund.
- Andrew G Haldane & Vicky Read, 2000. "Monetary policy surprises and the yield curve," Bank of England working papers 106, Bank of England.
- 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.
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