Are Central Banks' Projections Meaningful?

Galí, Jordi
Authors registered in the RePEc Author Service: Jordi Galí

No 8027, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Central banks' projections--i.e. forecasts conditional on a given interest rate path-- are often criticized on the grounds that their underlying policy assumptions are inconsistent with the existence of a unique equilibrium in many forward-looking models. Here I describe three alternative approaches to constructing projections that are not subject to the above criticism, using two different versions of New Keynesian model as reference frameworks. Most importantly, I show how the three approaches generate different projections for inflation and output, even though they imply an identical path for the interest rate. The latter result calls into question the meaning and usefulness of such projections.

Keywords: Conditinal forecats; Constant interest rate projections; Inflation targeting; Interest rate path; Interest rate rules; Multiple equilibria (search for similar items in EconPapers)
JEL-codes: E37 E58 (search for similar items in EconPapers)
Date: 2010-09
New Economics Papers: this item is included in nep-cba, nep-for, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://cepr.org/publications/DP8027 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Are central banks' projections meaningful? (2011)
Working Paper: Are Central Banks' Projections Meaningful? (2010)
Working Paper: Are Central Banks' Projections Meaningful? (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:8027

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP8027

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().