Forecasting ECB Monetary Policy: Accuracy is (Still) a Matter of Geography

Michael Ehrmann, Marcel Fratzscher and Helge Berger

No 2006/041, IMF Working Papers from International Monetary Fund

Abstract: Monetary policy in the euro area is conducted within a multicountry, multicultural, and multilingual context involving multiple central banking traditions. How does this heterogeneity affect the ability of economic agents to understand and to anticipate monetary policy by the European Central Bank (ECB)? Using a database of surveys of professional ECB policy forecasters in 24 countries, we find remarkable differences in forecast accuracy, and show that they are partly related to geography and clustering around informational hubs, as well as to country-specific economic conditions and traditions of independent central banking in the past. In large part, this heterogeneity can be traced to differences in forecasting models. While some systematic differences between analysts have been transitional and are indicative of learning, others are more persistent.

Keywords: WP; policy rate; interest rate; central bank; consumer confidence; ECB monetary policy decision; monetary policy; ECB; forecast; geography; history; heterogeneity; Taylor rule; learning; transmission; survey data; communication; ECB behavior; ECB policy decision; ECB headquarters; ECB policy rate; systematic error; ECB communication; expected ECB policy rate; ECB policy change; ECB decision-making; ECB activity; Central bank policy rate; Central bank autonomy; Inflation; Industrial production; Unemployment (search for similar items in EconPapers)
Pages: 42
Date: 2006-02-01
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Citations: View citations in EconPapers (17)

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Working Paper: Forecasting ECB monetary policy: accuracy is (still) a matter of geography (2006)
Working Paper: Forecasting ECB monetary policy: accuracy is (still) a matter of geography (2006)
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