Inflation Reports and Models: How Well Do Central Banks Really Write?

 
Author/Editor: Ales Bulir ; Jaromír Hurník ; Katerina Smidkova
 
Publication Date: May 29, 2014
 
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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: We offer a novel methodology for assessing the quality of inflation reports. In contrast to the existing literature, which mostly evaluates the formal quality of these reports, we evaluate their economic content by comparing inflation factors reported by the central banks with ex-post model-identified factors. Regarding the former, we use verbal analysis and coding of inflation reports to describe inflation factors communicated by central banks in real time. Regarding the latter, we use reduced-form, new Keynesian models and revised data to approximate the true inflation factors. Positive correlations indicate that the reported inflation factors were similar to the true, model-identified ones and hence mark high-quality inflation reports. Although central bank reports on average identify inflation factors correctly, the degree of forward-looking reporting varies across factors, time, and countries.
 
Series: Working Paper No. 14/91
Subject(s): Central banks | Inflation targeting | Monetary policy | Transparency | Keynesian economics | Economic models

 
English
Publication Date: May 29, 2014
ISBN/ISSN: 9781498387613/1018-5941 Format: Paper
Stock No: WPIEA2014091 Pages: 47
Price:
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