Do central banks respond timely to developments in the global economy?

Hilde C. Bjørnland (), Leif Thorsrud and Sepideh K. Zahiri ()
Authors registered in the RePEc Author Service: Hilde Christiane Bjørnland ()

No No 8/2016, Working Papers from Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School

Abstract: Our analysis suggests; they do not! To arrive at this conclusion we construct a real-time data set of interest rate projections from central banks in three small open economies; New Zealand, Norway, and Sweden, and analyze if revisions to these projections (i.e., forward guidance) can be predicted by timely information. Doing so, we find a systematic role for forward looking international indicators in predicting the revisions to the interest rate projections in all countries. In contrast, using similar indexes for the domestic economy yields largely insignificant results. Furthermore, we find that revisions to forward guidance matter. Using a VAR identified with external instruments based on forecast errors from the predictive regressions, we show that the responses to output, inflation, the exchange rate and asset returns resemble those one typically associates with a conventional monetary policy shock.

Keywords: Monetary policy; interest rate path; forecast revisions and global indicators (search for similar items in EconPapers)
Pages: 42 pages
Date: 2016-11
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Do Central Banks Respond Timely to Developments in the Global Economy? (2020)
Working Paper: Do central banks respond timely to developments in the global economy? (2017)
Working Paper: Do central banks respond timely to developments in the global economy? (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:bny:wpaper:0048

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