Are central banks' projections meaningful?

Jordi Galí

Journal of Monetary Economics, 2011, vol. 58, issue 6, 537-550

Abstract: Central banks' projections – i.e. forecasts conditional on a given interest rate path – are often criticized on the grounds that their 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 the above criticism, using the New Keynesian model as a reference framework. The three approaches are shown to generate different projections for inflation and output, even though they imply an identical path for the interest rate. The latter result calls into question the meaning and usefulness of such projections.

Date: 2011
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Citations: View citations in EconPapers (10)

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Related works:
Working Paper: Are Central Banks' Projections Meaningful? (2010)
Working Paper: Are Central Banks' Projections Meaningful? (2010)
Working Paper: Are Central Banks' Projections Meaningful? (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:58:y:2011:i:6:p:537-550

DOI: 10.1016/j.jmoneco.2011.11.004

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