Open AccessThe communication effects on inflation forecast errors: Empirical evidence from Colombia
Author(s) -
Juan Zapata Camilo,
Juan Camilo
Publication year - 2022
Publication title -
panoeconomicus
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.289
H-Index - 14
eISSN - 2217-2386
pISSN - 1452-595X
DOI - 10.2298/pan180101016z
Subject(s) - credibility , inflation (cosmology) , variance decomposition of forecast errors , variance (accounting) , central bank , econometrics , economics , empirical evidence , channel (broadcasting) , empirical research , forecast error , monetary policy , statistics , monetary economics , computer science , telecommunications , accounting , mathematics , political science , theoretical physics , philosophy , physics , epistemology , law
The purpose of this article is to explore the central bank's ability to management inflation forecast errors in Colombia. We present empirical evidence based on the Colombian experience with data from the period of 2008 to 2020. The communication channel selected for analysis is the press releases. The empirical evidence is divided into three steps: (i) regression analysis using an EGARCH model, (ii) use of VAR models, and (iii) variance decomposition analysis. The communications effects are significant for several months and that close to half of the forecast error variance can be explained by innovations in central bank communication. The results obtained allow monetary policymakers to develop more efficient strategies for anchoring expectations and strengthening the central bank credibility.