CENTRAL BANK STRATEGIC FORECASTING
In most of the literature on transparency it has been standard to assume that central banks release truthful information when communicating with the public. However, the monetary policymaker may act strategically and misrepresent private information intending to reduce economic volatility by manipul...
| Published in: | Contemporary Economic Policy |
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| Main Authors: | , |
| Format: | Article in Journal/Newspaper |
| Language: | English |
| Published: |
Wiley
2014
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| Subjects: | |
| Online Access: | http://dx.doi.org/10.1111/coep.12049 https://api.wiley.com/onlinelibrary/tdm/v1/articles/10.1111%2Fcoep.12049 https://onlinelibrary.wiley.com/doi/pdf/10.1111/coep.12049 |
| Summary: | In most of the literature on transparency it has been standard to assume that central banks release truthful information when communicating with the public. However, the monetary policymaker may act strategically and misrepresent private information intending to reduce economic volatility by manipulating inflation expectations. We set up a simple model which includes misrepresentation as a possible action for the central bank and derive some testable implications. The empirical evidence from the analysis of inflation forecasts of six central banks (Brazil, Canada, England, Iceland, New Zealand, and Sweden) is consistent with the existence of strategic forecasting . ( JEL E52, E58) |
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