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What Do Central Banks Know about Inflation Factors?

Author

Listed:
  • Aleš Bulíř

    (International Monetary Fund)

  • Jaromír Hurník

    (International Monetary Fund)

  • Kateřina Šmídková

    (Czech National Bank
    Charles University)

Abstract

We offer a novel methodology for assessing the quality of central bank monetary policy reports. We evaluate their economic content by comparing verbally reported inflation factors with factors identified from a simple new Keynesian model. Positive correlations indicate that the reported inflation factors were similar to the model-identified ones, marking high-quality inflation reports. Although sample bank reports on average identified inflation factors correctly, the degree of forward-looking reporting varied.

Suggested Citation

  • Aleš Bulíř & Jaromír Hurník & Kateřina Šmídková, 2016. "What Do Central Banks Know about Inflation Factors?," Open Economies Review, Springer, vol. 27(4), pages 795-810, September.
    • Handle: RePEc:kap:openec:v:27:y:2016:i:4:d:10.1007_s11079-016-9396-x
    DOI: 10.1007/s11079-016-9396-x
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    References listed on IDEAS

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    More about this item

    Keywords

    Inflation targeting; Kalman filter; Monetary policy communication;
    All these keywords.

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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