Are Central Banks' Projections Meaningful?

Jordi Galí

No 174, 2008 Meeting Papers from Society for Economic Dynamics

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. The present paper describes three alternative approaches to constructing projections that are not subject to that criticism, using a standard New Keynesian model as a reference framework. Yet, and even though they imply an identical path for the interest rate, the three approaches are shown to generate di¤erent projections for inflation and output. That result calls into question the meaning and usefulness of such projections.

Date: 2008
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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? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed008:174

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