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CENTRAL BANK STRATEGIC FORECASTING
Author(s) -
GOMEZBARRERO SEBASTIAN,
PARRAPOLANIA JULIAN A.
Publication year - 2014
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1111/coep.12049
Subject(s) - misrepresentation , economics , transparency (behavior) , volatility (finance) , central bank , inflation (cosmology) , monetary policy , monetary economics , inflation targeting , empirical evidence , financial economics , philosophy , physics , epistemology , theoretical physics , political science , law
In most of the literature on transparency it has been standard to assume that central banks release truthful information when communicating with the public. However, the monetary policymaker may act strategically and misrepresent private information intending to reduce economic volatility by manipulating inflation expectations. We set up a simple model which includes misrepresentation as a possible action for the central bank and derive some testable implications. The empirical evidence from the analysis of inflation forecasts of six central banks (Brazil, Canada, England, Iceland, New Zealand, and Sweden) is consistent with the existence of strategic forecasting . ( JEL E52, E58)