Monetary Policy Uncertainty: Is There a Difference Between Bank of England and the Bundesbank/ECB?

Iris Biefang-Frisancho and Peter Howells ()

No 613, 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 both the Bundesbank and ECB. However, studies based on market evidence show that on average, agents anticipate policy moves by both banks equally well. Since benefits from transparency should also show in a narrowing of the diversity in cross sectional forecasts, this paper extends the existing literature in an attempt to reconcile the contradictory evidence on ‘transparency’ of both banks. We show that the diversity in interest rate forecasts is greater under the Bundesbank/ECB than the Bank of England. Other factors than ‘transparency’ do not seem to affect interest rate uncertainty in Germany. Increasing difficulty in forecasting inflation appears to explain in part UK interest rate forecast dispersion.

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-eec, nep-for, nep-mac and nep-mon
Date: 2006-11
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Persistent link: http://EconPapers.repec.org/RePEc:uwe:wpaper:0613

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