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What Do Central Banks Know about Inflation Factors?

Ales Bulir (), Jaromir Hurnik and Katerina Smidkova

Open Economies Review, 2016, vol. 27, issue 4, 795-810

Abstract: Abstract We offer a novel methodology for assessing the quality of central bank monetary policy reports. We evaluate their economic content by comparing verbally reported inflation factors with factors identified from a simple new Keynesian model. Positive correlations indicate that the reported inflation factors were similar to the model-identified ones, marking high-quality inflation reports. Although sample bank reports on average identified inflation factors correctly, the degree of forward-looking reporting varied.

Keywords: Inflation targeting; Kalman filter; Monetary policy communication (search for similar items in EconPapers)
JEL-codes: E17 E31 E32 E37 (search for similar items in EconPapers)
Date: 2016
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Handle: RePEc:kap:openec:v:27:y:2016:i:4:d:10.1007_s11079-016-9396-x