Forecasting ECB Monetary Policy : Accuracy is (Still) a Matter of Geography

Author/Editor:

Michael Ehrmann ; Marcel Fratzscher ; Helge Berger

Publication Date:

February 1, 2006

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Monetary policy in the euro area is conducted within a multicountry, multicultural, and multilingual context involving multiple central banking traditions. How does this heterogeneity affect the ability of economic agents to understand and to anticipate monetary policy by the European Central Bank (ECB)? Using a database of surveys of professional ECB policy forecasters in 24 countries, we find remarkable differences in forecast accuracy, and show that they are partly related to geography and clustering around informational hubs, as well as to country-specific economic conditions and traditions of independent central banking in the past. In large part, this heterogeneity can be traced to differences in forecasting models. While some systematic differences between analysts have been transitional and are indicative of learning, others are more persistent.

Series:

Working Paper No. 06/41

Subject:

English

Publication Date:

February 1, 2006

ISBN/ISSN:

9781451863017/1018-5941

Stock No:

WPIEA2006041

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

42

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