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The Relativity Theory Revisited: Is Publishing Interest Rate Forecasts Really so Valuable?

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Abstract

In a New Keynesian model with asymmetric information we show that publication of macroeconomic projections and of the future interest rate path by the central bank can improve macroeconomic outcomes. However, the gains from publishing interest rate paths are small relative to those from publishing macroeconomic projections. Given that most inflation targeting central banks are already publishing macroeconomic projections this means that most gains from increasing transparency in this area may already have been reaped. This, together with the potential costs, may explain the relative reluctance of central banks to publish interest rate paths.

Suggested Citation

  • Adam Kot & Michal Brzoza-Brzezina, 2008. "The Relativity Theory Revisited: Is Publishing Interest Rate Forecasts Really so Valuable?," NBP Working Papers 52, Narodowy Bank Polski.
    • Handle: RePEc:nbp:nbpmis:52
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Michał Brzoza-Brzezina
      by Metablog Obserwatora Finansowego in Obserwator Finansowy on 2009-12-10 17:59:58
    2. Michał Brzoza-Brzezina
      by Metablog Obserwatora Finansowego in Obserwator Finansowy on 2009-12-10 17:59:58

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    Cited by:

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    2. Phan, Tuan, 2013. "Should Central Banks publish interest rate forecasts? - A Survey," MPRA Paper 44676, University Library of Munich, Germany, revised 01 Mar 2013.
    3. Magdalena Szyszko, 2017. "Central Banks Inflation Forecast and Expectations. A Comparative Analysis," Prague Economic Papers, Prague University of Economics and Business, vol. 2017(3), pages 286-299.
    4. Magdalena Szyszko & Aleksandra Rutkowska, 2019. "Forward-looking component in consumers’ expectations and inflation forecast targeting: the case of six European economies," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 37(1), pages 77-112.
    5. Magdalena Szyszko, 2013. "The interdependences of central bank’s forecasts and inflation expectations of consumers," Bank i Kredyt, Narodowy Bank Polski, vol. 44(1), pages 33-66.
    6. Baranowski, Paweł & Doryń, Wirginia & Łyziak, Tomasz & Stanisławska, Ewa, 2021. "Words and deeds in managing expectations: Empirical evidence from an inflation targeting economy," Economic Modelling, Elsevier, vol. 95(C), pages 49-67.
    7. Clemens J. M. Kool & Daniel L. Thornton, 2015. "How Effective Is Central Bank Forward Guidance?," Review, Federal Reserve Bank of St. Louis, vol. 97(4), pages 303-322.

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    More about this item

    Keywords

    interest rate path; monetary policy; adaptive learning;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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