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

Iris Biefang-Frisancho and Peter Howells ()

No 508, Discussion Papers from University of the West of England, Department of Economics

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.

Keywords: transparency; yield curve; forecasting uncertainty; Bank of England; Bundesbank/ ECB (search for similar items in EconPapers)
JEL-codes: E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-fmk, nep-for and nep-mac
Date: 2005-10
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Persistent link: http://EconPapers.repec.org/RePEc:uwe:wpaper:0508

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