Is Monetary Policy Really Forward-Looking? The Case of the Czech Republic, Poland and Hungary

Magdalena Szyszko ()
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Magdalena Szyszko: WSB University in Poznań

A chapter in Finance in Central and Southeastern Europe, 2017, pp 1-16 from Springer

Abstract: Abstract The following chapter presents the cross-country comparison of central banks’ decision-making premises. A simple index of forward-lookingness (FL) is created and applied for the Czech Republic, Poland and Hungary. This index verifies whether the central banks consider their own inflation forecast and inflation expectations while making decisions on the interest rates. The way how the modern central banks understand transmission mechanism justifies a search for an assessment of their forward-lookingness. Once it is possible to compare the FL of the central bankers, the conclusion on the relationships of their results and FL or the FL of the central banker and expectations of economic agents can be drawn. The additional goal of this chapter is to assess the central bank’s decision compatibility with its own inflation forecasts. Inflation forecasts, consistently used by the central banks, may support the stabilization of inflation expectations exhibited by economic agents. The results for three countries covered by the examination show the highest FL of the Czech National Bank which outperforms the National Bank of Hungary and the National Bank of Poland in both: FL and decision consistence with the macroeconomic forecast.

Keywords: Central bank; Inflation expectations; Inflation forecast; Inflation forecast targeting; Decision-making (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:spr:conchp:978-3-319-64662-6_1

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DOI: 10.1007/978-3-319-64662-6_1

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