The role of central bank forecasts in uncertain times

Jacek Kotłowski

No 363, NBP Working Papers from Narodowy Bank Polski

Abstract: The macroeconomic projection is one of the key communication tools of the central bank. We examine how the projection published by Narodowy Bank Polski affects the expectations of the professional forecasters. We focus on the role of uncertainty in explaining the impact of inflation and GDP forecasts released by the central bank on the forecasters’ expectations. We find that by disclosing its projection the central bank affects the inflation and GDP forecasts formulated by professional forecasters for all the examined horizons: the current year, the next year and two years ahead. Importantly, our results show that the impact of the NBP projection on the expectations of the professional forecasters is stronger when uncertainty is high, which remains in line with the Woodford (2001) model, in which public information helps private agents to separate signal from noise contained in the data. We also evidence that the coordinating role of the projection for the private sector inflation forecasts is larger in high inflation environment.

Keywords: Monetary policy; central bank communication; forecasting; inflation expectations; uncertainty. (search for similar items in EconPapers)
JEL-codes: C24 E37 E52 E58 (search for similar items in EconPapers)
Pages: 36
Date: 2023
New Economics Papers: this item is included in nep-ban, nep-cba and nep-mon
Note: The views expressed herein are ours and not necessarily those of Narodowy Bank Polski or the Warsaw School of Economics. We would like to thank the participants of the CFE and Money, Macro and Finance conferences as well as the participants of Senamek seminar at the Warsaw School of Economics for helpful comments and discussions. Comments received from an anonymous referee are gratefully acknowledged as well.
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Persistent link: https://EconPapers.repec.org/RePEc:nbp:nbpmis:363

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