Research Discussion Papers, Bank of Finland
No 22/1999:
The Value of Publishing Official Central Bank Forecasts
Juha Tarkka ()
and David Mayes ()
Abstract: The aim of the present analysis is to shed light on the
question whether Central Banks should publish their macroeconomic
forecasts, and what could possibly be gained in monetary policy if they did
so. We show that disclosing the Central Bank’s assessment of the prevailing
inflationary pressures in the form of a forecast improves macroeconomic
performance even if this assessment is imprecise. This is because it makes
policy more predictable. We are also interested in finding out the useful
content of the forecasts, if published, and answering the question whether
it makes a difference if these official forecasts are “unconditional” in
the sense of incorporating the Central Bank’s forecasts of its own policy
as well, or “conditional” on some other policy assumption. Possible
conditional alternatives may include assuming unchanged instruments,
however specified, or assuming the kind of policy that the private sector
is estimated to expect. The analysis comes out in favour of publishing
unconditional forecasts, which reveal the intended results of monetary
policy. A discussion of some practical issues related to publishing
official macroeconomic forecasts is also provided.
Keywords: forecasting; transparency; monetary policy; central banks; (follow links to similar papers)
42 pages, December 31, 1999
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