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Announcements of Interest Rate Forecasts: Do Policymakers Stick to Them?
Author(s) -
MIRKOV NIKOLA,
NATVIK GISLE JAMES
Publication year - 2016
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/jmcb.12321
Subject(s) - interest rate , explanatory power , economics , monetary policy , econometrics , value (mathematics) , monetary economics , financial economics , statistics , mathematics , philosophy , epistemology
If central banks value the ex post accuracy of their published forecasts, previously announced interest rate paths might influence the current policy rate. We explore if “forecast adherence” has affected monetary policy in New Zealand and Norway, where central banks have published their interest rate forecasts the longest. We derive and estimate policy rules with separate weights on past interest rate forecasts and find that they have explanatory power for current policy decisions, over and above their correlation with other conventional interest rate rule arguments.