Are Central Banks' Projections Meaningful?

Galí, Jordi

Are Central Banks' Projections Meaningful?

No 16384, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Central banks' projections-i.e. forecasts conditional on a given interest rate path-are often criticized on the grounds that their underlying policy assumptions are inconsistent with the existence of a unique equilibrium in many forward-looking models. Here I describe three alternative approaches to constructing projections that are not subject to the above criticism, using two different versions of New Keynesian model as reference frameworks. Most importantly, I show how the three approaches 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.

JEL-codes: E37 E58 (search for similar items in EconPapers)
Date: 2010-09
Note: EFG ME
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Published as “Are Central Banks’ Pro jection s Meaningful?,” Journal of Monetary Economics , 58(6 - 8), 2011, 537 - 550.

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Related works:
Journal Article: Are central banks' projections meaningful? (2011)
Working Paper: Are Central Banks' Projections Meaningful? (2010)
Working Paper: Are Central Banks' Projections Meaningful? (2008)
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