Autonomous Factor Forecast Quality: The Case of the Eurosystem

Romain Veyrune and Shaoyu Guo

No 2019/296, IMF Working Papers from International Monetary Fund

Abstract: The publication of liquidity forecasts can be understood as part of central banks’ push toward greater transparency regarding monetary policy implementation. However, the advantages of transparency can only be realized if the information provided is accurate and reliable. This paper (1) provides an overview of the international practice of publishing the forecasts; (2) proposes and implements a framework to evaluate the accuracy and reliability of forecasts using the long history of Eurosystem forecasts as a case study; and (3) analyzes the Eurosystem forecast errors to determine the factors influencing forecast quality. A supporting factor for a high-quality forecast is the contemporaneousness of the information used, whereas money market segmentation can weigh on forecast quality.

Keywords: WP; autonomous factor; liquidity manager; refinancing operation; market segmentation; central banking; operational frameworks; autonomous factors; forecasting; evaluation; forecast error; balance sheet development; ECB estimate; Liquidity; Open market operations; Exchange rate arrangements; Money markets; Central bank accounting; Global (search for similar items in EconPapers)
Pages: 40
Date: 2019-12-27
New Economics Papers: this item is included in nep-mon
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