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Monetary Policy Transparency and Uncertainty: A Comparison between the Bank of England and the Bundesbank/ECB

Author

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  • Iris Biefang-Frisancho Mariscal

    (School of Economics, University of the West of England)

  • Peter Howells

    (School of Economics, University of the West of England)

Abstract

It is widely believed that institutional arrangements influence the quality of monetary policy outcomes. Judged on its ‘transparency’ characteristics, therefore the Bank of England should do better than the Bundesbank/ECB. We show that this is not confirmed by agents’ ability to anticipate central bank decisions. Furthermore, benefits from transparency should also show in a narrowing of the diversity in cross sectional forecasts. We show that the diversity in interest rate forecasts is no greater under the Bundesbank/ECB than the Bank of England. This suggests that other factors than ‘transparency’ may affect interest rate uncertainty. Increasing difficulty in forecasting inflation appears to play a part in the UK while being less of a problem in Germany.

Suggested Citation

  • Iris Biefang-Frisancho Mariscal & Peter Howells, 2005. "Monetary Policy Transparency and Uncertainty: A Comparison between the Bank of England and the Bundesbank/ECB," Working Papers 0508, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    • Handle: RePEc:uwe:wpaper:0508
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    File URL: http://carecon.org.uk/DPs/0508.pdf
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    References listed on IDEAS

    as
    1. Georgios Chortareas & David Stasavage & Gabriel Sterne, 2003. "Does monetary policy transparency reduce disinflation costs?," Manchester School, University of Manchester, vol. 71(5), pages 521-540, September.
    2. Gabriel Pérez Quirós & Jorge Sicilia, 2002. "Is the European Central Bank (and the United States Federal Reserve) predictable?," Working Papers 0229, Banco de España.
    3. Daniel C. Hardy, 1998. "Anticipation and Surprises in Central Bank Interest Rate Policy: The Case of the Bundesbank," IMF Staff Papers, Palgrave Macmillan, vol. 45(4), pages 647-671, December.
    4. William Poole & Robert H. Rasche & Daniel L. Thornton, 2002. "Market anticipations of monetary policy actions," Review, Federal Reserve Bank of St. Louis, vol. 84(Jul), pages 65-94.
    5. International Monetary Fund, 1998. "Anticipation and Surprises in Central Bank Interest Rate Policy: The Case of the Bundesbank," IMF Working Papers 1998/043, International Monetary Fund.
    6. Daniel L. Thornton, 2003. "Monetary policy transparency: transparent about what?," Manchester School, University of Manchester, vol. 71(5), pages 478-497, September.
    7. Geraats, Petra M., 2000. "Why Adopt Transparency? The Publication of Central Bank Forecasts," Center for International and Development Economics Research, Working Paper Series qt0hw7h7cp, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
    8. Lorenzo Bini Smaghi & Daniel Gros, 2000. "Open Issues in European Central Banking," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-333-98188-7.
    9. Andrew G Haldane & Vicky Read, 2000. "Monetary policy surprises and the yield curve," Bank of England working papers 106, Bank of England.
    10. Mr. Kevin Ross, 2002. "Market Predictability of ECB Policy Decisions: A Comparative Examination," IMF Working Papers 2002/233, International Monetary Fund.
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    Cited by:

    1. Pierdzioch, Christian & Rülke, Jan-Christoph, 2014. "Central banks’ interest rate projections and forecast coordination," The North American Journal of Economics and Finance, Elsevier, vol. 28(C), pages 130-137.

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    More about this item

    Keywords

    transparency; yield curve; forecasting uncertainty; Bank of England; Bundesbank/ ECB;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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