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

By Michael Ehrmann, Marcel Fratzscher, Helge Berger

February 1, 2006

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Michael Ehrmann, Marcel Fratzscher, and Helge Berger. Forecasting ECB Monetary Policy: Accuracy is (Still) a Matter of Geography, (USA: International Monetary Fund, 2006) accessed September 20, 2024

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.

Subject: Banking, Central bank autonomy, Central bank policy rate, Central banks, Financial services, Industrial production, Inflation, Labor, Prices, Production, Unemployment

Keywords: Central bank, Central bank autonomy, Central bank policy rate, Communication, Consumer confidence, ECB, ECB activity, ECB behavior, ECB communication, ECB decision-making, ECB headquarters, ECB monetary policy decision, ECB policy change, ECB policy decision, ECB policy rate, Expected ECB policy rate, Forecast, Geography, Heterogeneity, History, Industrial production, Inflation, Interest rate, Learning, Monetary policy, Policy rate, Survey data, Systematic error, Taylor rule, Transmission, Unemployment, WP

Publication Details

Pages:

42
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2006/041
Stock No:

WPIEA2006041
ISBN:

9781451863017
ISSN:

1018-5941

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